EMEA: Europe takes the long road to LTE

European carriers seem to be emphasizing the “Long” in “Long Term Evolution” technology. While the region is home to some of the world’s biggest economies, it continues to trail other developed markets in adopting LTE-based high-speed mobile technology, often referred to as 4G.
In South Korea nearly two-thirds of mobile customers use LTE, but across Europe only 3% of total connections were LTE in 2013, according to the industry association GSMA. In the United States, coverage is already approaching 100% and in the Europe Union, it’s hovering at a little more than half.
Still, this leaves a lot of room for growth, and GSMA projects LTE will make up 53% of connections in Europe by 2020, and coverage will reach 91% of the population.
Ovum senior analyst Paul Lambert believes that with few exceptions, European carriers have not been in a big hurry to launch LTE — and for good reason. “The operators in Europe have by and large approached 4G in a very sound way,” he said. “They haven’t made the mistakes they made with 3G.”
Lambert noted that many carriers invested heavily in licenses and infrastructure for 3G, only to be faced with technical problems with the networks they had paid so dearly to build.
In contrast, Lambert called Europe’s LTE network build “a tremendous success story.” Devices are working well with the networks and major technical problems have been avoided. And LTE rollouts are happening: as of April 2014, the GSMA counted 80 commercially launched LTE networks in 26 countries within the European Union.
“Later this year and into next year, I think we’ll see 4G become ubiquitous in Europe and become the main access method for mobile users,” Lambert said.
Pockets of progress
A few carriers are leading the way, although which one is on top depends on the criteria. Looking solely at subscription numbers, Deutsche Telekom’s German division is first with nearly 4.3 million signed up. However, DT is also the largest carrier in Europe and that number as a percentage of its base is relatively low at 11%.
In terms of LTE innovators, many observers point to EE in the United Kingdom. The company has based its entire brand on 4G, and EE’s marketing efforts appear to be paying off since it doubled its LTE subscribers in the first six months of 2014 to 4.2 million (about 14% of its customer base) with a goal of reaching 6 million by the end of the year.
The company claims that all it has to do to attract customers to 4G is simply to show it to them. “When we demo 4G to a customer in-store, they’re hooked — they can see the difference and immediately understand the benefit that 4G will bring them,” an EE spokesperson said in a statement.
On a smaller scale, Dutch operator KPN has reached a similar level as EE percentage-wise with 14% of its 10 million base of mobile customers on LTE, according to the telecom consulting firm Tefficient. The carrier also claims to have nationwide coverage.
Fredrik Jungermann, managing director of Tefficient, points to Telenor in Norway as a potential leader in Europe in terms of penetration of its total base with approximately 20% to 25%. The carrier does not cite subscription numbers, only penetration of terminals, but it has about 600,000 to 800,000 subscribers.
However, if percentage of customers with 4G plans is truly the criteria, then the carrier “3” in the U.K. would be tops as it has taken the approach of providing LTE with all its plans. However, whether all of its customers have an LTE-enabled device to use the service is another matter entirely.
Barriers to LTE in Europe
There are three prerequisites for 4G adoption, according to Jungermann: networks, handsets and provisioning. In other words, carriers have to invest in 4G infrastructure, users need to have LTE-enabled mobile devices and carriers must provision customers’ sim cards for 4G. If all three things aren’t in place, 4G adoption has a hard time getting off the ground.
Oddly enough, the strength of Europe’s 3G networks has been one of the factors hindering the move to the next generation. “Each region is unique, and Europe is unique in that its 3G networks were of high quality,” said Ovum’s Lambert. “For the most part, 3G networks were doing a great job and because of that operators haven’t seen a need to invest in very fast 4G.”
But good 4G networks alone aren’t enough. The Nordic countries are leading Europe in terms of availability, and Sweden has the best coverage in the European Union with 99.2% at the end of 2013, according to a European Commission report. Yet the country’s regulator found that Sweden’s largest carrier, Telia Sweden, had a penetration rate of only 12%.
Jungermann says the popular iPhone — and carriers’ reluctance to continue handset subsidies — is partly to blame.
“In Sweden and in many European countries, iPhone penetration is very high, and many people own the old iPhone 4 and iPhone 5, neither of which are 4G enabled,” Jungermann said. “People are very happy with their iPhones … they are not very interested in spending €500 [about $667] on a new phone just to get 4G.”
In the United Kingdom, LTE coverage is approaching 61%, but Jungermann argues that British carriers’ practice of provisioning sim cards only for customers who pay a premium for 4G plans has been turning potential 4G users away. “Most operators outside of the U.K. have gone for the approach that a megabyte is a megabyte,” said Jungermann. “This is of course better for adoption.”
While Vodafone is clearly hanging on to a 4G premium in its home market — and paying for it by having only 900,000 LTE subscribers — EE seems to have dropped its premium in favor of packages that come with different data allowances and benefits. The operator, which was recently ranked the best network in the United Kingdom, also seems to realize the importance of educating the public about the benefits of LTE.
But many European carriers have yet to hit on the right formula to win customers over to 4G, and the region continues to lag other regions in 4G adoption. It may just be that European consumers are happy with what they have — their old smartphones and reliable 3G networks — or they don’t know what they’re missing.