In any global context, the telco mainstays of the European Union now tends to resemble instruments of industrial policy with some loosely attached telecom activities attached. The picture has changed a wee bit with the arrival of ten new member states, bringing the EU total to 25. But Germany, France and to a lesser extent the UK, Italy and Spain are beginning to resemble heavyweight pawns in a global game of trade policy chess.

They are generally underweight against North America. By and large, the Europeans are trying to flaunt their undoubted pre-eminence in the world of cellular mobile against the US dominance of the Internet industry landscape.

In a straight fight between European and American players in each other’s telecom markets, the balance appears to be shifting in favour of Europe. US telcos have withdrawn from Europe as competition intensifies at home. European operators, led by Vodafone and T-Mobile, are sticking it out in America, increasingly viewing their stakes there as financial rather than strategic plays. With little or no pressure on their operations in Europe, thanks in part to the retreat of the Americans, they can afford to bide their time and wait until the price is right. In the world of put options, these place a restraining leash on the largest US carriers and have a unique tectonic potential.

Yet Europe is no longer particularly interested in North America. Telecom regulation in the US, not least on issues such as foreign ownership,  errs on the side of protectionism and is always likely to veer back into full-blown xenophobia. Many Europeans seem to think that it is not worth the effort.

Look east
Instead, they see the potential in their eastern neighbours. Low price tags and an undeniable scope for further growth, on the back of expanding economies, is drawing their attention. That’s OK, so long as the prevailing condition of American inward-looking strategies persists. Don’t bet on that.

Rights, wrongs and Richter scales
Techtonix scale/short term: 6/10. An invigorated telecom sector provides action in re-drawing the ICT landscape, led by telcos.
Techtonix scale/mid term: 6/10. Pump-priming of the technology sector by the European Commission offset by leakage of industrial output to other regions.
Techtonix scale/long term: 4/10. Europe finds itself at the bottom of an industrial cycle that North America has already climbed out of.
Jim Chalmers

Tomorrow: Middle East players expand their spheres of influence.