Regulators, Investors Split on Investing in European Telecom Markets, Eye 5G

It's a timely topic, said FCC Commissioner Brendan Carr. When the agency looks at where the U.S. is in terms of networks, it sees a massive transition in wireless networks from 4G to 5G, he said. It's estimated the U.S. will need around $275 billion in investment to shift to 5G, which will create up to 3 million jobs, he said. The U.S. is focused on ways to take capital to be invested in networks and make it go farther, such as by driving down regulatory costs to speed deployment, Carr said.

When advising clients on the best risks and outcomes for telecom investments, UBS Senior Investment Analyst Xavier Lefranc looks at the telecom space globally, he said. Europe always has the same issues, he said. The regulatory environment is complex and time-consuming; Europe lacks a single market with scale, unlike the U.S. or China; and there's focus on unbundling and wholesale services that pose the risk of a network being appropriated, he said. These factors make it difficult to predict and plan for investing, Lefranc said.

Colleagues who spoke recently with U.S. investors were shocked some big players neither had any investments in the European telecom market nor wanted any, said Daniel Bailey, HSBC global head of telecom, media and technology. European telecom stocks have underperformed; the U.S. telco index is up 35 percent, but Europe's is negative, he said. He urged investors not to get carried away by the negativity because European regulators are enabling network investment. But the mobile market isn't good, and the investment environment that will enable 5G deployment isn't there, he said.

Asked how Europe can turn things around when the U.S. is the clear winner for investment, Bailey said even if all the changes being discussed are delivered, they won't be enough because they won't create the overarching certainty people need to invest. The elephant in the room is European competition policy, which at one point considered three mobile operators to be competitive in a national market but later changed that to four, he said.

People should ask why there's regulation, said BEREC Chairman Sébastien Soriano, who also heads French regulator ARCEP (Autorité de régulation des communications électroniques et des postes). Industry demands deregulation but before regulation there were state monopolies, he said. There's a public demand for telecom networks not only as a market but also as a common good on which society can rely, he said. European regulation today is a "different alchemy" among policymakers, administrations and the market, which doesn't just deal with competition but aims more broadly to ensure that services benefit society, he said. That alchemy is unique to Europe and "we have to be proud of it." The question is not whether there should be more or less regulation but what the new political objectives are and how can they be fulfilled, he said.

In turbulent times, regulators provide predictability and consistency, said Soriano. "A lighthouse can be useful." Soriano worries about the ability of future European regulators to offer consistency and predictability because there are legislative proposals that run counter to the EC e-communications code proposal.

Europe's digital single market is the largest by GDP, one reason for investors to take a look, said Roberto Viola, EC DG Connect director general. The telecom sector has seen solid economic growth over the past year and the overall political environment remains rather solid, he said. The EC made its investment-friendly e-communications regulatory proposal last year and is sticking to it, he said. As an investor itself with the European Investment Bank, the EC has seen from the private side how much interest there is in telecom investing, he said. Europe's future looks OK, Viola said.