European telcos target defence as next battleground

• Telecom sector expected to benefit from increased European defence spending in the next few years
• Telcos are already investing in sovereign solutions and prepping for opportunities in defence
• As always, the regulatory landscape in Europe remains a cause for concern

In the increasingly fraught geopolitical climate, much has been written of late about NATO and European Union plans to increase defence spending over the coming few years: NATO allies have committed to invest 5% of GDP on defence and security-related spending by 2035, while the European Union’s Readiness 2030 plan aims to unleash up to €800bn for defence.

European industries that have traditionally not been heavily involved in defence, including the telecom sector, are now considering how they can benefit from this spending splurge on national security. 

Notably, a recent report from Boston Consulting Group (BCG) highlights telecom as one of six “high-potential sectors” that could benefit from an estimated €500bn opportunity for non-defence contractors from 2026 to 2029. 

BCG cites key opportunities such as secure communications systems, datacentres, cloud storage and navigation systems for military vehicles, and estimates the market value for telecom firms to be €45bn over the next four years. 

Gearing up  

Telcos and vendors are already tapping into Europe’s growing demand for sovereign cloud and AI solutions as well as cybersecurity, and are clearly eyeing national defence budgets.

Just last week, Bloomberg reported that Deutsche Telekom (DT) is in talks with German car manufacturer Porsche to become anchor investors in a new venture capital fund focused on European defence technology. The report said that DT-linked investment fund Digital Transformation Capital Partners (DTCP) is looking to raise €500m for the fund.

Meanwhile, Orange Business has set out its stall by establishing a dedicated unit to “support defence and security actors in France and Europe”. The new unit, Direction Défense & Sécurité, aims to enable Orange Group’s B2B division to “strengthen and develop existing activities” to address several key opportunities related to the defence sector as the world moves into a new era of regionalisation and conflict.

It is worth noting here that DT and Orange are also key backers of the European Union’s IRIS² programme, the public-private partnership aiming to build a multi-orbit constellation delivering secure communication services to the EU and its member states. The SpaceRISE consortium established by satellite operators Eutelsat, Hispasat and SES has been selected to deliver IRIS² and DT has already been picked to support various terrestrial elements. 

In Hungary, the 4iG group has established 4iG Space and Defence Technologies and recently announced a 96bn forints (HUF) (US$282m) investment by private equity firm iG TECH Capital Fund Management, which is owned by 4iG chairman Gellért Jászai.

In Spain, media reports suggest Telefónica is “well positioned” to benefit from a planned €10.47bn increase in the Spanish government’s defence and security spending. Around a third of the budget has been allocated to telecom and cybersecurity investment. 

The Spanish state announced the spending plan in April. In the same month, Telefónica’s head of digital public policy, Nuria Talayero, penned a blog that outlined the EU’s defence action plan and declared that the telecom sector “is a key strategic partner in enhancing Europe’s technological progress and resilience in a complex geopolitical context”. 

In addition to European telcos and satellite companies (satcos), defence is a strategic sector for telecom equipment providers, such as Ericsson and Nokia. Indeed, the Finnish vendor has issued a flurry of defence-related news this year, ranging from its work with Telia and the Finnish Defence Forces on a 5G standalone slice handover through to the trial of 5G technology in a military exercise in Norway and collaborations with Blackned and Bittium.

Regulatory concerns

As the momentum grows, Telefónica’s Talayero and others have nevertheless warned that the current regulatory framework for the telecom sector could undermine wider European efforts to achieve its security goals.

Industry organisation Connect Europe wrote in April that operators need to invest in network automation and orchestration, modernise legacy systems, adopt AI and post-quantum cryptography, and attract cybersecurity talent in order to assure the future resilience of networks.

“However, these efforts are hampered by the sector’s structural challenges, such as low returns on investment, market fragmentation, heavy regulation and intense competition from mostly non-European tech giants,” it said. 

According to Connect Europe’s State of Digital Communications 2025, telecom investment declined by 2% in 2023. “A new policy approach is essential to reverse this trend, promoting sustainable growth, innovation and investment,” it added.

- Anne Morris, Contributing Editor, TelecomTV