The Connectivity Dividend

How next-generation connectivity can define Europe’s ability to compete, innovate, and preserve its way of life

The digital highways we build today will shape Europe’s competitiveness, resilience and cohesion for decades to come.

Europe stands at a turning point. It faces a war on the continent, a lingering cost-of-living crisis and fierce technology competition. And, more recently, a deterioration in export conditions to one of its largest partners.

And these are not the only challenges. The bigger picture across much of Europe is that productivity is stalling, innovation is declining, and sovereignty is threatened.

None of these are new. It is well known that Europe underinvested in its security during the last 20 years. But the same is true for European investment in essential public and private infrastructures, in growth, and in innovation. These all serve as self-inflicted obstacles to Europe’s future prosperity, the funding of its social economy model, and its way of life.

Without decisive action to reverse long-seated complacency, Europe will face continuously declining living standards, febrile security and growing questions will be asked of democratic institutions.

Besides improving the business environment and deepening the internal market, Vodafone firmly believes that accelerating digital infrastructure, services and technologies is one of the key levers to address many of Europe’s challenges.

No future-proof economy, society or security can succeed without modern digital highways, and the innovative services they enable. They are the plumbing that carries data – one of today’s most fundamental assets.

While 4G may have built the United States’ pre-eminence in the consumer internet, it’s 5G that will define leadership in the industrial internet. It is the ‘invisible’ infrastructure that can create jobs, boost productivity and growth, and reinvigorate innovation. And it is increasingly critical for national security and resilience.

This is why Vodafone remains concerned that Europe is falling dangerously behind on the deployment of a key connectivity technology – 5G standalone (5G SA).

According to Ookla, only 1.3% of Europeans enjoyed 5G SA coverage in Q2 2025, versus 20% in the US and 80% in China. In one example between 2005 and 2022, Europe’s ICT investment trailed the US by €1.16 trillion. This means that Europe has become a major net importer of digital innovation.

Meanwhile, the competitiveness gap is widening. In 2008, Europe’s economy was 10% larger than the US. But in 2022, it was 23% smaller. A key turning point is how much more successful US firms have become at adopting and scaling digital technologies.

Europe’s digital weaknesses are damaging it economically and socially. Only 62% of rural households in the EU had access to very high-capacity networks in 2024. The same infrastructure gaps that slow down businesses also leave millions of citizens with poor connectivity or limited digital access.

This undermines access to health, education and other public services, and limits people’s ability to participate fully in society. The longer digital exclusion persists, the deeper its impact becomes, feeding a vicious circle of economic stagnation, social fragmentation and declining trust in public institutions.

And digital inequalities carry political consequences. Studies show that limited access to modern digital tools suppresses civic engagement and disrupts democratic processes.

Indeed, Europe is increasingly dependent on technologies invented and produced elsewhere, raising implications for its sovereignty and security in an increasingly fragile world.

Why connectivity, especially 5G standalone, is part of the solution

Competing with the US and China requires a European economic revival rooted in productivity and innovation. Digitalisation is one of the most powerful levers to achieve this. But this depends on infrastructure, and especially on 5G SA.

Unlike older networks, 5G SA provides the low latency, reliability and programmability required for real-time services like AI, smart manufacturing and autonomous transport. A full rollout of 5G would add €164 billion to EU GDP by 2030 – a 5-to-1 return on investment for the wider economy. To put this in perspective, this is greater than the entire European steel industry’s gross value added to the EU economy.

Connectivity ties our society and democracy together. It underpins citizens’ full participation in modern life, defining whether and where they can find work, access healthcare and education, stay informed or engage in civic society.

Since the invasion of Ukraine and the wider deterioration in global geopolitical relationships, the pace of threats to critical infrastructure has vastly accelerated. Connectivity itself enables modern defence, powering advanced military capabilities and dual-use applications. If governments are thinking about their civil preparedness, national security or even their battlefield effectiveness, then Europe’s overall resilience depends on secure, reliable networks.

What needs to change

Along with many other telecoms operators, Vodafone is eager to invest in Europe’s critical infrastructure to deliver secure, high-quality networks that support competitiveness, inclusion and resilience.

But we cannot do it alone. That’s why Europe urgently needs to:

Invest for innovation. 5G SA is a customisable next-generation network for AI, smart manufacturing and cloud-based services. Waiting for ‘proven’ demand means waiting too long as competitors race ahead. South Korea, for example, created demand through early investment – around 30% of mobile users had 5G by 2022, one of the highest rates globally.

Treat connectivity as critical infrastructure. Networks should sit at the heart of national investment as a pillar of economic and regional growth. Where market failure happens, governments should step in.

Fix the rules. Market structures should incentivise long-term investment and scale. The Digital Networks Act is a once-in-a-generation opportunity to modernise Europe’s antiquated framework.

Connectivity is not a given. It enables Europe’s ability to compete, defend itself and preserve its way of life.

Yet several European telcos have had to withdraw from European countries due to unsustainable market conditions. In Vodafone’s case, it exited Spain and Italy. EU rules and their intrusive applications meant Vodafone could not lead market transformation in a manner that would serve those citizens best.

The learning is clear: if governments want to maintain a degree of European control over critical infrastructure, they need to implement policies that foster viable investment environments. Trying to investment screen the problem away will not work – only creating truly healthy investment and business conditions will.

This is Europe’s moment. It has the talent and the ambition. It has proved in the past that it can rise to serious challenges. But the world is more dangerous and divided than at any point since the fall of the Berlin Wall.

Policymakers don’t need to be 5G engineers to lead. What Europe needs is political leadership that puts the continent’s digital infrastructure, services and technologies front and centre for its future.

With the Digital Networks Act expected from the European Commission in December 2025, Vodafone explores the issues in more detail in a new paper, The Connectivity Dividend: How next-generation connectivity can define the EU’s ability to compete, innovate, and preserve its way of life.