Europe’s technology and telecommunications sector is approaching a decisive moment. The choices made over the next few years will determine whether the continent can rebuild its digital competitiveness or continue slipping behind global leaders.  

Recent assessments highlight both the urgency and the unevenness of Europe’s current trajectory. The Kearney Telecom Health Index 2025, which evaluates five dimensions of national telecom performance, shows Norway (82), Sweden (81) and Switzerland (76) at the top of the regional rankings, while Italy (57), Belgium (58) and the United Kingdom (60) sit at the bottom. These disparities reflect deeper structural challenges that the European Union (“EU”) has yet to resolve. 

Almost a year after the new European Commission took office pledging to reinvigorate Europe’s economic strength, leading industry executives argue that progress on digital reform remains inadequate. Their collective message to Brussels is clear: incrementalism will not close the gap with global competitors. Unless decisive action is taken soon, Europe risks a long-term disadvantage in digital capability, industrial innovation and productivity growth. This warning has become increasingly stark as comparisons with the US and Asia continue to widen. An executive at the Technological Sovereignty, Security and Democracy commented, “The US is the most important partner in Security and Technology for the EU.” 

While competitors have invested heavily in state-of-the-art digital networks, Europe has struggled with fragmented markets, inconsistent regulation and chronic under-scaling. Only 2 percent of Europeans currently use 5G standalone technology - essential for industrial automation, advanced robotics and the seamless integration of AI. Within the limits of available data, this figure is considerably lower than the 25 percent adoption rate in the US and the more than 77 percent penetration reported in China. 

The implications are significant, as a senior specialist focused on telecoms at a well-known German Bank remarked, “Europe’s digital lag risks putting it into a position where: (i) it regulates AI but does not control core AI infrastructure, (ii) it generates industrial data but does not own the platforms that monetise it and (iii) it mandates cybersecurity but depends on non-European stacks to deliver it.” 

“Europe’s digital lag risks putting it into a position where: (i) it regulates AI but does not control core AI infrastructure, (ii) it generates industrial data but does not own the platforms that monetise it and (iii) it mandates cybersecurity but depends on non-European stacks to deliver it.”

Senior specialist corporate finance, Germany 

For many industry observers, the proposed Digital Networks Act (“DNA”) represents a critical opportunity to reverse this trajectory. By redefining the regulatory foundations of the EU telecom sector, the Act aims to spur large-scale investment, strengthen economic security and reinforce digital sovereignty. Its success will depend on whether policymakers can produce a forward-looking framework that encourages innovation, reduces fragmentation and makes it easier for operators to deploy next-generation infrastructure. A frustrated TIM executive remarked, “Why is it taking so long at the EU Commission? We need a lot of political will for things to happen. It’s always a challenge for the EU to come together.”

Momentum for reform is emerging at the national level. The recent Summit on European Digital Sovereignty showcased a set of Franco-German initiatives designed to reinforce Europe’s technological autonomy. These initiatives emphasise innovation-friendly regulation, fair digital markets, robust data-protection standards, shared digital infrastructures, open-source tools and support for digital commons. It offered a platform to coordinate national strategies, attract private capital, and reduce Europe’s dependency on external providers in strategic areas such as cloud services and critical data infrastructure.  

Telecom operators themselves remain pivotal to the continent’s digital transformation. They have invested more than EUR 500 billion in 5G over the past decade, yet Europe’s structurally fragmented market - home to more than 100 operators across 27 countries - limits their ability to scale. As the senior specialist noted, “Network operators are a critical lever to change, however, they are structurally constrained by fragmentation, regulation and low returns.” The specialist continued, “The Draghi report [a major strategic document for European competitiveness] provides a blueprint but slow implementation possibly prolongs underinvestment and fragmentation, [and] limits operators’ ability to move up the value chain e.g. AI, data and cybersecurity services.” An executive from Orange remarked, “Two thirds of the traffic in 2030 will be AI driven. So, how do we create more value from our networks?” 

“Network operators are a critical lever to change, however, they are structurally constrained by fragmentation, regulation and low returns.”

Senior specialist corporate finance, Germany 

Europe finds itself at a moment that demands action. “The EU is overregulating everything,” commented a TIM executive, showing the need for clearer rules, simplified regulation and an environment that supports consolidation could unlock the investment levels required to build globally competitive digital networks. The executive continued, “All EU markets can benefit from consolidation in the sector. We’re not looking for monopolies; we’re asking to go down from 4 to 3 players.” What is certain is that without a comprehensive reform, Europe risks missing its best opportunity in a generation to regain technological leadership.