Summer scorecard #2: Is Europe dangerously fragmented or joyously diverse?

• As we outlined in yesterday’s scorecard, mobile pricing in the US is way higher than in Europe
• Why are the US and European mobile environments so different?
• Which environment is best suited to ease the introduction of 5G?

Yesterday we marked the competitive scorecard in the US on one competitive measure - broadband pricing. Today it’s Europe’s turn. The EU very nearly followed the US model by promoting operator consolidation in the belief that this would boost further mobile investment in infrastructure.  In the event Europe has pretty much stuck to its belief (which used to be an American belief) that competition was the best way to stimulate investment. With 5G looming and consolidation so far avoided, how does the European mobile market look? Dangerously fragmented or joyously diverse?

Why is there a difference between European and US mobile environments?  Europe - mostly because of its very real cultural differences - has retained a diversity of national mobile operators, latterly in the face of continual calls for consolidation. The EU along with the ‘peripheral’ European countries not part of the EU ( Iceland, Switzerland, Norway and soon the UK) are obviously very different from each other in terms of language, heritage, economics and so on. That means that the way a telco constructs offers and the way it markets them differs from country to country, as does the local laws and customs.

For a mobile operator this reality affects everything from tower site acquisition to rolling out (or not) fibre, to the sorts of phones offered. So even where a single mobile group has networks in a multiple countries, it usually doesn’t ‘consolidate’ them into one uniform organisation to win all the economies of scale supposedly on offer. It’s more likely to be successful by fostering a fair degree of autonomy to best serve those local conditions.

Nevertheless, a loud hue and cry went up across the first half of this current decade bemoaning the ‘fragmentation’ of the mobile market in Europe and recommending that it be allowed to consolidate to improve the economics of LTE and speed its roll-out.

The real reasons for this very definitely ‘in-country’ consolidation however, was not to win economies of scale, but to lower the impact of price competition as the consumer market changed with the onrush of the data-hungry smartphone.  Facing one or two competitors was far less dangerous for the remaining players and much prefered to facing two or or three.

Considerable effort was then expended trying to convince the EU authorities that consolidation would give them a superior mobile environment to crow about and at one point, none other than Randall Stephenson CEO of AT&T, arrived in Europe, seemingly to advise the then digital commissioner, Neelie Kroes, on how to proceed. Stephenson memorably spoke of deploying the “AT&T playbook” at one point.

Neelie Kroes made great play of developing her ‘Connected Continent’ proposals which posited consolidation as a cure-all for Europe’s supposed ‘falling behind’ the US (see yesterday’s Scorecard #1)  That slogan cleverly implied that multiple telcos meant the continent wasn’t already properly connected. Total nonsense of course.

In the end Europe didn’t go the way of the US with a major round of mobile consolidations, but it was a close run thing.

By 2015 TelecomTV was reporting that the new competition commissioner, Margrethe Vestager was lining up with the European Parliament “to spike the move by the other half of the commission - represented by Andrus Ansip’s ‘Digital Single Market’ and Günther Oettinger’s,  ‘Digital Economy & Society’ portfolio - to further European telco consolidation.”

And Vestager doggedly followed through in the face of strong opposition to scotch several ‘in-country’ mobile mergers, thus leaving most of mobile Europe unmerged.

Meanwhile something amazing had happened in one of the least competitive and most sleepy mobile territories - France.

In 2011 Iliad launched its ‘Free’ mobile service in France. Not free, of course, but pretty close to it when compared to the offers from France’s other players. Despite cries of pain and promises of a political strike-back by French politicians, Free Mobile gained a full 8 per cent of the market within five quarters and went on to completely restructure France’s market to become one of the best in Europe. Free's recipe was to blend HSPA+, Wi-Fi and an all-fiber backbone to offer unlimited voice, texting and data for a flat fee of $25 in a market where customers would have had to pay two to three times that to get something similar, and its kept up the competitive pace while completely building out its own network.

With the introduction of the first stage of 5G late this year and next, many hope that another phase in mobile competition will kick off in Europe. Not ‘consolidation’ as the incumbent players would like - although the French regulator, ARCEP, has opened the way for consolidation in France - but a fresh round of price competition between players, stimulating the handset and applications market in turn.

Iliad, for instance, has taken its “Free playbook” off to Italy where it seems more than likely to repeat its French success. Launched in May, Free in Italy has already added a million users with a €6 a month package.

Another challenger network, MásMóvil, launched in Spain way back in 2008, has continued to thrive with its value brand and remains Spain’s fastest-growing network. In response, Telefónica has launched its UK O2 brand there as a cut-price offering to compete with MásMóvil.

So the largely unconsolidated European market remains and, at least for the moment, is able to produce a €6 ($6,82) a month mobile plan. Can’t be that bad.