4G or not 4G? There’s something rotten in the state of Europe

Tax is always a debated topic, and there tend to always be two (or more) sides of the coin. Taxes are sometimes used to drive behaviour away from unhealthy activities, such as consuming alcohol or tobacco. And often it works, Swedes’ alcohol consumption (at least inside Sweden’s borders…) is a typical example of where taxation has lead to an intended effect, and the government and the governed are both better off in the end. Governments create taxes on behaviour and on what they believe is good for the society, and hope that the result doesn’t turn sour or backfires. Which it unfortunately does sometimes. France’s President Hollande’s new income tax springs to mind. It could not have been the idea that a die-hard socialist like Gerard Depardieu should say that enough is enough and move to Belgium. The French taxman might still be able to tax him somehow but they have certainly removed his motivation to stand up for his mother country.

Why do I say all this? Well, we actually have a Hollande vs. Depardieu situation in the European mobile industry. Europe has been leading the mobile industry development for about 30 years but has lost out big time when it comes to the latest generation of technology – 4G. Now when we close the books for 2012 we can just observe that Europe is significantly falling behind countries such as the US, South Korea and Japan. So it would really make sense for EU politicians and Regulators to do something constructive about the situation to make sure that we start catching up with current 4G market leaders. Unfortunately and similar to Monsieur Hollande, Regulators in Europe are creating taxes (they call it spectrum auctions, and it has happened before…) that are counter productive, at least if the intention was that this region should catch up in the 4G market and provide better services for the consumers. The Netherlands is the most recent example where the Government has generated 3.8 billion Euro in revenues to itself from the spectrum auction that finished last week. The Dutch Regulator may laugh all the way to the Treasury believing they have done an excellent job, but the reaction from analysts and investors is quite the opposite. They see the huge expenditures that spectrum licenses constitute for the Operators and wonder how much of this will be taken from dividends, from investments in networks and from other development efforts that make mobile industry investments compelling and make growth possible. The difference between the Hollande vs. Depardieu case and this one is that it is easier to move a household from France to Belgium than it is to move a Mobile Operator from one country to another. But the money moves freely in a globalized economy, so the net result is the same; Less tax revenues for France and less investments in the European mobile industry. If it weren’t for the high alcohol tax I would go for a drink now.

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