2023-09-18 12:14:46
The telecommunications sector in Spain has been involved in fierce competition for years – for companies, many years, too many. The permanent trade warthe continued strength of low-cost operators and the emergence of new rivals supported by regulations that promote them have created a framework of falling average prices beneficial for consumersbut it has broken the business of large groups, which suffer from it in their accounts.
An ecosystem that results in declining revenues and profitability and that at the same time forces large telecos to continue executing billion-dollar investments in networks, infrastructure and digital technology to address the exponential growth of data traffic and not get lost in the era of 5G and AI.
The framework of hyperrivalry and its harmful effects on the business of large companies is a breeding ground for the corporate movements that were already being prepared (merger of Orange Spain and MásMóvil, possible sale of Vodafone Spain after years of loss of business, consolidation of independent fiber companies…). It has also paved the way for the unexpected emergence of Saudi Arabia as Telefónica’s first shareholder, taking advantage of its low stock market price.
Great atomization
In just 25 years we have gone from the state telecommunications monopoly represented by the old Telefónica to having around a hundred operators registered in mobile and landline services. The liberalization that began in 1998 has taken the sector from the old system of the all-powerful single operator to another with four large groups (Telefónica, Orange, Vodafone and Más Móvil), with another handful of smaller but growing rapidly (Digi, Avatel, Finetwork…) and a legion of small operators, to the point of having a hyperlocal fiber company in almost every major Spanish tourist destination.
Low-cost companies, according to operators’ estimates, have been managing for years to retain around 60% of all new registrations in the sector., both portability (changes of companies in which the client maintains the previous number) and lines with new numbering. Saving on the bill is the main reason that moves customers to change telephone and internet service companies, according to the consumer trends survey of the National Markets and Competition Commission (CNMC).
Large operators are trying to overcome the low-cost wave in two ways: with more complete and high-value offers (premium packages with unlimited data consumption, exclusive content…) that allow them to grow in the most profitable customer segment and willing to pay more and also launching their own companies with low-cost offers (Lowi in Vodafone, Simyo in Orange or several of MásMóvil’s brands) or with more adjusted services (O2 from Telefónica). Even so, in the last two years the Romanian group Digi is by far the one that has grown the fastest in number of clients with its aggressive pricing plan.
Deflationary trend
The weight that low-cost companies have in customer movements and the need for all rivals not to lose ground in The trade battle has installed the sector in a deflationary trend. Mobile rates have become common with limited services below 10 euros per month and fiber services below 20; More complete packages also have very low prices.
According to the CNMC, despite inflation peaks and general increases in many products in the shopping basket, the average price of quadruple convergent packages (with mobile and fixed services in both telephone and broadband) was at the end of the last year of less than 43 euros per month, the lowest since it began to be measured in the household panel a decade ago. And the quintuple packages (include television) They were sold at an average price of 77 euros, their lowest level since 2017.
While Mobile and broadband use skyrockets (data traffic grew in Spain last year by 15%, and mobile data, 42%) and the increase in users is constant (there are more than 58 million mobile lines in Spain, 10 million more than inhabitants, and fiber accesses to the home are around 17 million), the sector’s income has plummeted.
The industry’s income reached its record in 2008: 44 billion euros. Last year, the turnover of all companies in the sector did not reach 34.8 billion, 21% less despite the fact that communications and digital services fill everything. The collapse is greater in the case of income from retail services destined for the end customer, those most affected by the price war: a drop from 37,000 million in 2008 to 24,235 million, 34% less. In 15 years the sector has lost more than a third of its retail business.
Related news
The European Commission has been promoting liberalization of the sector for almost three decades based on maximizing competition to guarantee affordable prices for citizens and companies. The community strategy actively seeks to guarantee in each national market the existence of four reference operators with the capacity to compete, national regulations have been lifted that have promoted the appearance of new rivals, guaranteeing them access to the networks of large groups at regulated prices, and Everything has been completed by Brussels with vetoes or the imposition of severe conditions on some merger operations between relevant firms.
Orange España and MásMóvil – second and fourth operators – are awaiting approval from the European Commission to merge their businesses and create a national giant. The two companies and their own major rivals in the Spanish market demand that the operation be authorized without imposing harsh conditions for the transfer of assets to advance the consolidation of the sector. Large companies fear that the decision will once again be aimed at promoting a fourth operator – with Digi as the best positioned – and will not allow progress towards greater rationalization of the injured business.
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