Europe Hurting Telecom Industry: Alcatel-Lucent CEO

European regulations are stifling innovation within the telecom industry and preventing its growth, Ben Verwaayen, CEO of Paris-based telecom equipment maker Alcatel-Lucent has told CNBC.

"It's not just a French problem it's a European problem. If you look to why it is that the U.S. is so much [more] ahead than Europe it's because of the business environment and what you're allowed to do because this is a regulated business. The situation in Europe is very unfortunate," Verwaayen said in an interview telecast on Thursday.

He added that the 28 regulators in Europe had created rules focused on lowering prices for customers, whereas in the U.S. regulators had also focused on spurring innovation and new investments. "You don't have the incentive to take risks and take the investments [in Europe]," Verwaayen said.

Verwayeen warned that the full effect of an overbearing regulatory system in Europe would eventually drive out innovation and limit the possibilities for growth within the industry.

"The realities are that if you have to invest as an operator your investment incentives in the U.S. and Latin America are very different -- that is not blame, that is a fact. If the objective is only low prices for consumers, but then don't expect that we'll be at the forefront [of innovation], don't expect that a lot of activities will start here in Europe," he said.

Alcatel-Lucent shares have fallen 14 percent this year and the company has reported two successive quarters of losses, even as it has been weighed down by debt. (Read More: Alcatel CEO Promises Cost Cuts as Loss Widens )

Last month, Verwaayen indicated further cost cuts and said "the market had been awful for everybody."

Verwaayen told CNBC the company was "determined to execute" a restructuring plan, which includes 5,500 jobs worldwide despite a backlash from French labor unions and the French government.

In the latest interview, Verwaayen said a number of factors would need to change to enable Europe to get up to speed with the U.S. and other regions in terms of telecom technology.

These included cross-border mergers to consolidate the industry, stimulus for smaller companies and greater competition.

"We need to bring competition to where it really matters and that's in choice and at the moment the regulator decides my choice and I don't think that's great," he said.

Verwayeen was less than optimistic of a turn-around in the telecom equipment market in the short term, warning that business in Europe would remain weak in 2013.

He added that Europe lacked an ability to harness competition and talent and this was leaving it in the slow lane.

"I'm afraid Europe is ultra-conservative and ultra-defensive. With employment we try to protect what's here instead of creating [it]," he said.

By CNBC's Shai Ahmed; Follow her on Twitter @shaicnbc