Companies and individuals are going to consume three times as much mobile data in the next five years. It would deserve to be celebrated, if it were not for the fact that under current conditions, operators will not obtain a sufficient return on their investments to triple installed capacity. Such a lapidary statement corresponds to Mats Granryd, general director of the GSMA, the representative body of the sector and promoter of the Mobile World Congress, which will open its doors in Barcelona in seven days from today.
The penetration of mobile broadband networks is uneven in countries and regions of the world. Among the best equipped, that of the United States is high and those of China and India are even higher; There is a boom in the Middle East, while Europe is losing weight on the global map, despite its progress in deployments. This produces what the GSMA calls a usage deficit. Some 400 million people do not enjoy broadband coverage, an issue that requires solutions, but of the other 3,000 million who live under 3G 4G 5G coverage, only a portion of them enjoy it.
Granryd rounds out the argument. “Wherever there are good 5G connections – and now its latest version, 5G Advanced – there is better preparation to offer the features that companies expect: network partitioning, low latency, high availability.” And in return, the elusive promise of better margins.
There is in Europe – and not in other parts of the globe – a barrier that the GSMA pressures to be corrected although it would seem incorrigible: regulation. “Keep in mind that regulations are predominantly national: in the United States, with more business-friendly rules, while in Europe they tend to favor consumers. In our opinion, European regulators urgently need to reform their regulations and even their mentality; I am in a position to affirm that the European members of the GSMA are very dissatisfied with the current state of affairs and with little desire for change.”
European regulation is suffocating operators and their industry, maintains the interviewee. “A consolidation is needed that cuts the number of operators, but that does not come seasoned with what regulators call remedies.” Explicitly, Granryd refers to Spain: “During 2023, your country has lived that experience (the merger between Orange and MásMóvil and the almost consummated absorption of the Vodafone subsidiary) with two processes that have confirmed Brussels' ideas about how deal with initiatives to consolidate a national market over which it has that prerogative.”
The merger between Orange and MásMóvil reduces the number of players from four to three, “but there are signs that a fourth will soon join the competition; We have nothing against it, as long as consolidation serves to seek growth, not to blow up prices. “We believe there are more creative ways to generate new revenue.” In the purchase of the Vodafone subsidiary by a venture capital fund, Granryd sees the conviction that it could turn the company around, but at the same time the Zegona fund does not hide that it has no intention of remaining for many years, "in which We see a risk of it being a market disruptor. We give them the benefit of the doubt because we know some of those investors, but we do not know with what criteria they plan to manage what they have acquired.”
The result of this table is an investment gap that is not exclusive to Spain, because it is notorious that the capital market is suspicious of the telecommunications sector. Or certain categories of the sector. “Suddenly, money costs money, something that didn't happen a couple of years ago. At this moment, it seems to have deflated a little, but there is no doubt about the lack of money to invest, because the operators have yet to repay the accumulated debt. Return on investment is critical to ensuring that money is spent wisely: a return on capital employed of around 5%, and a cost of that capital at 8% is not what an investor expects.”
Consequently, he continues, “if we compare the average stock market price of GSMA members, it leaves no one happy: it has fallen between 30% and 50% in the last five years. With one exception, that of Deutsche Telekom, the only European operator that has a subsidiary in the United States.”
In addition, there are different visions of the transition from 5G to 6G. Granryd chooses, mischievously, to suggest another interview to the chronicler in a few years. “As he knows, approximately every ten years a standard comes on the scene that disrupts the market. If the rule were met, 6G should appear in 2030, but I fear that this time it will not be so simple. The goals are different because 2G, 3G and 4G were designed with the consumer in mind and this time what we call – there is no consensus, he warns – is at stake, 5G as-a-service, which is aimed at the business market (B2B).” . The cyclical need exists, he points out, but changing one business model for another using expanded capabilities takes a long time: “Frankly, I don't see that any operator is pushing hard for 6G to take off.”
