GSMA criticises Vodafone and Nokia for weakening EU market

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GSMA chairman and CEO of Telecom Italia Group Franco Bernabè has launched a stinging attack on Nokia and Vodafone for letting down the European mobile industry.

In early September, Vodafone announced it was selling its 45 per cent share in Verizon Wireless to joint venture partner Verizon Communications for $130 billion (£84 billion), while in the same week Nokia announced it was selling its devices and services division to Microsoft for £4.6 billion.

Speaking at the GSMA’s Mobile360 event in Brussels, Bernabè said that despite the revenue benefits of the deals, losing such assets could hamper the long-term growth of Europe’s mobile industry.

Bernabè said: “We must re-establish Europe as a leader in mobile, but what is happening recently is not the exact way that things should be moving in Europe. We have seen many changes in the last few days and they are not in the direction of strengthening the European industry. I think that what we have seen… in the last few days is not what Europe needs.

“I think that, for our markets, open, trustworthy investment is very welcome but, despite the fact I think Microsoft will do a fantastic job, what happened to Nokia does not go in the direction of helping Europe become a champion. With what has happened to Vodafone, I am not sure again if it is the right thing to help the European industry grow.

“I think Vittorio Colao (Vodafone CEO) has done a fantastic job in selling the Verizon stake. All this is welcome from a market perspective but we need to consider that Europe is losing ground and we cannot think that this is the future. We need a boost to get back into the driving seat of innovation.”

Bernabè added that investments in the US mobile industry have “outpaced” those in Europe, and the gap is expected to widen. He also said that there needs to be an end to “discrimination” in favour of new entrants, allowing market forces to determine the optimum number of players in each member state.

Crossroads

On the day of Mobile360, the GSMA also released a report suggesting the European mobile industry is at a “crossroads” as despite having the world’s highest unique subscriber penetration rate at 70 per cent, Europe is the only region in which revenues have begun to decline – falling from €162 billion (£136 billion) in 2010 to €151 billion (£126 billion) in 2012.

The report also claimed that Europe is falling behind in the deployment of next-generation mobile technologies.

GSMA director general Anne Bouverot said: “Europe was long viewed as a pioneer in mobile, but, as this report illustrates, it is now lagging behind other regions in the deployment of mobile broadband, particularly in 4G/LTE.

“Despite this, the mobile industry can play a key role in the European recovery, but this will require policy that encourages investment in mobile broadband connectivity, enables innovation and helps build consumer confidence in mobile services. This should be at the heart of the Commission’s planned proposals on a single telecoms market.”

The GSMA report found that at the end of 2012, LTE accounted for less than one per cent of total devices in Europe, compared to 11 per cent in the US and 28 per cent in South Korea. Earlier research by the GSMA also found that data connections in the US are 75 per cent faster than the EU average, with the gap expected to grow.

Regaining leadership

The report outlined a number of key areas where appropriate EU policy and regulation can help regain lost technology leadership by encouraging investment and consolidation, enabling innovation and building consumer confidence.

Encouraging investment through spectrum “harmonisation” and reducing barriers to market consolidation were identified as crucial issues to address to improve Europe’s fortunes. According to the GSMA report, the EU has indicated that a total of 1,200MHz of spectrum should be allocated by 2015 to meet the expected growth in data traffic, but only an average of 600MHz has been released and there are delays in allocating the digital dividend spectrum in the 800MHz band.

The GSMA estimates that up to €119 billion (£100 billion) of incremental GDP could be generated over the period to 2020 if the issues are resolved, producing €23 billion (£19 billion) of additional tax revenues and creating up to 156,000 new jobs across the region.

Meanwhile, with more than 100 operators in Europe as well as close to 530 MVNOs, the GSMA said that consolidation has become a problem as operators face “inconsistent spectrum policy, ongoing competitive pressures and increasing revenue declines and margin erosion”.

The report suggested that the European Commission can help reduce barriers to efficient market consolidation by simplifying merger reviews and taking a more cautious approach to the imposition of remedies.

Bouverot said: “The focus needs to be on stimulating investment to achieve long-term economic growth. The move to a connected life, where nearly everything and everyone are connected, presents an important opportunity for Europe to regain its leadership position.

“Collectively, we must create an environment that will attract and nurture investment in mobile. The single telecoms market initiative presents an important opportunity to enable this and we must get it right.”

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