Digital gold rush for pioneers, as the European infrastructure market is booming

Security, connectivity, sustainability… These are the terms that personify the present and the future of our digital societies.

The perspectives for economic growth seem limitless as the digital revolution expands, and both the public and private sectors are fully on board, often merging to consolidate expertise. The applications of digital technology across our economic life is experiencing exponential growth, and it is only the beginning.

This expected economic boom driven by technological advances can be observed across a plethora of sectors, each depending on a multitude of actors along the value chain, each depending to varying degree on private innovation and public funding. The sprint towards global connectivity and digital sustainability is leveraging the know-how of professionals across diverse sectors: operators, deployment specialists, hardware/software developers….

Indeed, the multitude of initiatives developing solutions for the connected economy depends on public funding. Europe, in particular, has demonstrated its commitment to digital through its NextGenerationEU recovery plan, which includes Digital Decade targets for 2030. The plan involves investing €806.9 billion in order to make Europe “greener, more digital and more resilient.”

Furthermore, with war raging in Ukraine, and European energy security under threat, investing in digital and sustainable solutions will be key, as this would contribute to accelerating the energy transition, allowing for greater independence.

Innovation in Industry 4.0

One sector where this transformation is really taking shape is in manufacturing, in what has become known as Industry 4.0. According to a recent analysis by Vantage Market Research, the global Industry 4.0 market is expected to grow to around US$254.5 Billion by the year 2028. This rapid growth is being driven by an acceleration in technological innovation, a growing adoption of artificial intelligence (AI) and internet of things (IoT) in the manufacturing sector and innovations in rechargeable batteries.

One classic example of a European company leading the global digital revolution is Siemens AG, the Munich-based multinational conglomerate who has been described as a leader in the Industry 4.0 revolution. The company has been partnering with various other firms to find various software solutions for Industry 4.0, such as SAP SE, with whom they are developing product lifecycle, supply chain and asset management solutions, or its initiative in partnership with IBM and Red Hat that offers an open, flexible and more secure solution for manufacturers and plant operators.

Furthermore, the company has set up a so-called Advanced Manufacturing Transformation Centre (AMTC) initiative in Southeast Asia “that provides guidance, support and training to manufacturing facilities in Southeast Asia on their journey of adoption, transition and transformation towards advance manufacturing.”

“AMTC has been established to accelerate the adoption of advanced manufacturing technologies through simplification, digitalization and collaborations,” said Benjamin Moey, Siemens Vice President (Advanced Manufacturing, Digital Industries, APAC).

Smart Cities, 5G and fibre optic

In another field, the general trend towards energy transition and sustainable investments has seen an explosion in technological innovation in order to develop so-called smart cities. EIT InnoEnergy, for example, recently signed an agreement with Banco Santander to support innovation in green energy across Europe and accelerate the development of its portfolio of start-ups. The city of Zurich stands out for its intelligent building management system that interconnects heating, electricity and cooling management systems, in order to be able to adjust its consumption to reflect demand, and thus make real progress in energy saving.

The progressive generalisation of 5G will play a crucial role in the development of the different applications necessary for a successful digital transformation. With the promise of sub-millisecond latency (compared to 25 to 40 for 4G), and a 100-fold increase in the volume of data transmitted, 5G is key for completing the transition to Industry 4.0 and smart, sustainable cities.

Enthusiasm for 5G has really grown across Europe. In Germany, for example, Deutsche Telekom has declared that over 63,000 antennas are already transmitting 5G across the country, providing coverage to over 90% of the population. “Our 5G goal for this year is to continuously improve the customer experience,” said Walter Goldenits, head of technology at Deutsche Telekom Germany. “To this end, we will continue to expand rapidly and, above all, rely on network innovations.”

According to GSMA, mobile operators are expected to invest up to €145 billion in the 5G rollout in the period 2020-2025. Europe, although still lagging somewhat behind its global peers, has doubled its 5G connection over the last few years and has surpassed the 50% FTTH mark. Mobile operators are nonetheless benefitting for the general focus on digital connectivity.

On the other hand, the fibre optic rollout in some of European largest countries has generally been quite slow. Germany, Italy and the UK, for example, are lagging behind the rest, accounting for almost 60% of homes still to be passed with fibre in the EU27+UK area, according to FTTH Council Europe and IDATE. These countries are starting to take note of the successes in France and Spain in recent years and are beginning to leverage actors right down the value to chain in order to catch up.

A solidifying ecosystem

The acceleration of network developments and initiatives geared towards the connected economy has meant that huge budgets are at stake. This has led to many of the bigger firms moving to consolidate their position in the value chain through mergers and acquisitions.

This phenomenon of mergers and acquisitions is especially notable in the field of telecommunications, which to some extent represents the global architecture of digital innovations, from which the various specialised sectors will be able to connect their specific services.

Naturally, this is therefore also the case for the global service providers who develop and maintain the national and international digital infrastructures. This requires investment capacities that only very large structures are capable of harnessing, generating and managing in the long term. The latest example is the merger between Orange and Masmovil in Spain. The two firms hope to create a $21 billion telecom unit, with the joint venture is expected to bring 450 million euros of annual synergies from the third year after closing. The deal would be a huge blow to Vodafone, who have been struggling in the Spanish market for years, but were nonetheless tipped to team up with Masmovil.

“The deal is the first major test of regulators’ appetite for in-market consolidation since the pandemic”, writes Kester Mann, analyst at CCS Insight. “Should the deal receive the green light, it could open the floodgates to a host of other alliances in markets such as Italy, Portugal, and the UK.”

With the big players adopting such a strategy, this is also the case in the deployment and field management sector:the installation of network (5G/optic fibre…) tools for end users, individuals and companies, their connection to the network, and their daily maintenance. There is a considerable market here, with forecasts expecting growth in the region of $2.3 billion by 2027.

This growth is being driven by a BtoBtoC approach, where major operators are looking for service providers who can guarantee them reliability and homogeneity of services. These larger firms, who are more industrialised and more structured, are eating up smaller companies with specific expertise.

In this highly fragmented sector, only a few industrial-sized companies manage to consolidate their activity by a reliable, structured, strategic model that is conducive to scaling economies and expanding conglomerates. Based in Luxembourg, Solutions 30 is well established in several countries across Europe and the UK, with an annual revenue of €874 million in 2021. The company has a team of over 15,000 service engineers and deals with up to 75,000 service calls per day. Solutions 30, being involved into several strategic business units (telecoms, energy, security, IoT, etc.), now claims to be in the best position to take advantage of stimulus plans dedicated to the development of digital infrastructures in Europe.

According to Gianbeppi Fortis, CEO of Solutions 30, “over the coming months, the most important challenge will be to seize these growth opportunities throughout Europe and to put the tools, processes, and teams in place to ensure that this growth takes place in the right conditions, just as we did in France between 2015 and 2020.” Consequently, Solutions 30 has been expanding and consolidating in order to better respond to the digital revolution, recently acquiring the British company Mono Consultant Limited for UK rollout, and signing a €210 million contract with TIM in Italy.

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