Europe’s telecom giants are reinventing themselves, expanding beyond traditional mobile and broadband services to seize the growing opportunities in cloud computing, artificial intelligence (AI), and digital infrastructure. With substantial investments in 5G, smart cities, and the Internet of Things (IoT), these companies are positioning themselves as central players in the rapidly evolving digital landscape. However, their ambitions are frequently hindered by outdated regulatory frameworks that are ill-equipped to accommodate these advancements.
As telecom operators push for deregulation to drive consolidation, simplify cross-border operations, and fast-track infrastructure development, concerns about the potential erosion of competition and consumer protection are rising. At the same time, the rapid evolution of semiconductor technology adds another layer of complexity, emphasizing the urgency for Europe to secure its place in the global race. How the European Union (EU) navigates the Chips Act and invests in semiconductor innovation will ultimately determine the future of both telcos and next-generation technologies.
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The Need for Regulatory Change
As telecom broadens its scope, the industry faces regulatory challenges that could hinder broader ambition. Europe’s regulatory framework, established to foster competition and prevent monopolies in traditional telecom services, is becoming increasingly unsuitable for the fluctuating digital landscape. Telecom companies argue that existing rules prevent them from forming strategic mergers and collaborations, making it difficult to compete globally. They believe that relaxing these regulations will foster infrastructure investment, expand their digital portfolios, and aid them in becoming major players in emerging markets like cloud computing and AI.
The European Commission (EC) has acknowledged the need for regulatory reforms in the telecommunications sector to encourage investment in advanced technologies like 5G and cloud-based services. In February 2024, EU regulators were reportedly considering easing merger rules for mobile telcos and expanding regulations to encourage big tech companies to fund 5G rollouts.
This initiative aims to help telcos consolidate resources, invest in infrastructure, and innovate, strengthening their position against non-traditional telecom giants like Amazon, Google, and Microsoft, which are making significant inroads into the telecom sector. With cloud and AI-driven services becoming central to digital infrastructure, these companies are ramping up their investments. Amazon Web Services (AWS) plans to spend USD 100 billion on data centers and related infrastructure in 2025, surpassing Microsoft’s USD 80 billion and Alphabet’s USD 75 billion in investments.
Leading telecom operators, including Vodafone, Orange, Deutsche Telekom, and Telefónica, argue that strict merger regulations prevent them from forming strategic collaborations to compete globally. Consequently, many operators are tapping regions like Africa and the Middle East, where regulations are more flexible and market opportunities are greater.
At this year’s Mobile World Congress (MWC) held in Barcelona, Telefónica’s CEO, Marc Murtra, called on the European Union to relax merger regulations to facilitate consolidation among European telecom companies. He emphasized that such consolidation is essential to enhance technological capabilities, strengthen Europe’s strategic autonomy, and foster economic growth.
“The European Commission, European Member States, regulators, and others must adapt their regulation and objectives to allow technological and telecom consolidation.”
Vodafone’s CEO, Margherita Della Valle, has suggested that the European Commission could learn from the UK’s approach to merger assessments in the telecom sector.
Della Valle proposed two key changes for the EU: extend the assessment timeline beyond the current 18-month period to three years to reflect the technology industry’s dynamics better and consider the role of mobile virtual network operators (MVNOs) in maintaining market competition when evaluating mergers that reduce the number of major operators from four to three.
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New Partnerships and Expansion into Digital Ecosystems
In addition to navigating regulatory changes, telcos are working to redefine their role in the broader tech ecosystem by investing heavily in new partnerships. These collaborations with tech giants are helping telcos build out the infrastructure required to support emerging technologies such as cloud computing, edge services, and AI, and provide customers with the computing power needed to drive autonomous vehicle (AV) and augmented reality (AR) innovation.
One such collaboration is Deutsche Telekom’s partnership with Google Cloud, which aims to enhance its radio access network (RAN) operations by developing an AI agent known as ‘RAN Guardian.’ This AI agent utilizes Google’s Gemini 2.0 within Vertex AI to analyze network behavior, detect performance issues, and implement corrective actions autonomously.
Similarly, Vodafone has entered into a 10-year strategic partnership with Microsoft, committing to investing USD 1.5 billion in cloud- and customer-focused AI services. This investment will leverage Microsoft’s Azure OpenAI Service and Copilot technologies to transform Vodafone’s customer experience (CX) and expand its managed Internet of Things (IoT) business.
Orange and Capgemini, in partnership with Microsoft, launched Bleu—a cloud platform tailored to meet the specific needs of French public sector entities. This platform enables users to utilize Microsoft 365 and Microsoft Azure services within a secure and compliant environment.
Telefónica has integrated its AI-driven Kernel platform with Microsoft Azure, supporting the GSMA’s Open Gateway initiative, which strives to transform communication networks into programmable platforms.
New Rules in the Chip Game
Recent advancements in AI have been closely tied to progress in semiconductor technology, driven by the development of advanced chips. However, most of these chips are imported outside of Europe, primarily from U.S.-based NVIDIA, which has become a leader in AI hardware due to its specialized GPU architecture. The global chip industry is currently dominated by Taiwan’s TSMC and South Korea’s Samsung, making it difficult for other regions, including Europe, to play a significant role in cutting-edge semiconductor manufacturing. Although, Intel intends to establish a chip fabrication plant in Europe. Still, the project has faced delays, highlighting Europe’s ongoing challenges in achieving semiconductor independence and relying on non-European suppliers for advanced chips.
The European Chips Act, introduced in 2023, was supposed to bolster Europe’s semiconductor industry amid rising global competition and geopolitical tensions. Its primary goal was to increase the EU’s share of global chip production from 10% to 20% by 2030, supported by a EUR 43 billion investment to enhance the semiconductor ecosystem and reduce external dependencies.
The Draghi report, authored by former European Central Bank President, Mario Draghi, builds upon these ambitions, emphasizing that while the Chips Act lays the groundwork for strengthening Europe’s semiconductor industry, more decisive action is needed to ensure long-term competitiveness. It highlights the urgency of reducing Europe’s strategic dependencies and reinforcing its position in the global semiconductor supply chain.
Despite these recommendations, progress has been slow, raising concerns among European lawmakers about the region’s ability to compete in the rapidly evolving semiconductor landscape. On March 24, 2025, members of the European Parliament urged the European Commission to swiftly launch a new support program for the semiconductor industry, emphasizing the need to invest in AI chips and address technological gaps. The lawmakers highlighted that recent geopolitical shifts have shown Europe cannot rely on uninterrupted access to advanced technologies. They criticized the slow progress of the 2023 Chips Act and called for a more aggressive approach to make the EU an attractive location for research and development (R&D), production, and investment in semiconductors.
Meanwhile, in 2025, AWS has significantly advanced its AI initiatives through substantial investments and strategic developments. The company unveiled the Ocelot quantum computing chip, aiming to expedite the timeline for developing commercially viable quantum computers by up to five years. AWS also announced plans to invest heavily in AI infrastructure, with capital expenditures (CapEx) projected to reach USD 26.3 billion in the fourth quarter to support AI services and technology infrastructure. This includes the development of custom AI chips like the upcoming Trainium3, scheduled for release in late 2025.
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Can the Industry Keep Up?
As Europe’s telecom industry explores new growth opportunities, regulators will need to encourage investment in next-gen networks and digital services, such as 5G, AI, and cloud computing, while ensuring fair competition and protecting consumers. The regulatory framework must evolve to keep pace with this shift, particularly given the increasing importance of semiconductor technology for building future telecom infrastructure.
Telcos are advocating for deregulation in areas like mergers and acquisitions (M&As), arguing that consolidation will help pool resources and accelerate network rollout. However, there are concerns that deregulation could reduce competition, raise consumer prices, and stifle innovation. The European Commission’s decisions, especially regarding the semiconductor industry and its integration with telcos, will play a key role in shaping the future of Europe’s telecom sector.
