2010 Ireland - Telecoms, IP Networks, Digital Media and Forecasts

Ireland’s telecom sector crucial to economic recovery

BuddeComm’s annual publication, Ireland - Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in Ireland.

The poor economic climate has deeply affected the Irish telecom market since the second half of 2008. The government in 2009 underwrote some €50 billion worth of toxic debt accumulated by the three major banks. Mounting debts, compounded by low corporate tax and reduced income tax, obliged the government to accept up to €85 billion as a bailout from the EU and IMF in late 2010, while a four-year economic plan was devised to drive down the country’s deficit to 3% of GDP by the end of 2014 by cutting €15 billion off state spending. Ireland’s last three budgets have already cut public spending by up to €14 billion. The government’s indebtedness has made it difficult to honour its former pledges of public money to upgrade national telecoms networks, and so it has had to lean increasingly on the cash-strapped private sector.

The telecom sector has also been affected by reduced consumer spend on all but essential services. While mobile and broadband services are considered a ‘safe’ revenue stream for operators, there is little extravagance among consumers, and so operators have experienced lower revenue and smaller cash reserves to invest in networks, infrastructure and upgrades. Over the past six years or so changes in telecom sector revenue have mirrored economic output, and as the current recession has deepened both GNP and telecoms revenue have declined. Nevertheless, the contribution of the telecom sector to GDP has grown during the last two years, reaching about 2.5% by the second quarter of 2010, suggesting that telecoms is moderately healthier than other sectors of the economy.

Ireland’s mobile penetration is on a par with the EU average, having grown at one of the fastest rates in the EU in recent years. The country also has an above average level of data revenue as a percentage of total mobile revenue (at about 30%). The mobile market makes up about half of total telecom revenue. The proportion of the population with a mobile subscription overtook that with a fixed phone line at the end of 2004.

About a fifth of all households have no fixed-line telephony, while mobile originating minutes account for about half of all voice traffic. Although blended ARPU has continued to fall, it is as the second highest in the EU (marginally behind Switzerland), and some €12 higher than the EU average. ARPU is expected to rise from 2011 in response to increased data traffic outweighing a shift to prepaid usage among consumers.

The total number of broadband subscriptions continues to grow, though the rate of growth has slowed in recent quarters and is largely propped up by the mobile broadband sector. There were about 1.6 million subscriptions in Ireland at the end of 2010, representing a 5% growth year-on-year, while mobile broadband connections increased at about 33% in the year. DSL accounts for about 47% of all broadband subscribers, while the cable sector accounts for 11% and other platforms (fixed wireless, satellite and mobile broadband) the remainder.

Eircom’s dominance in the broadband market is gradually slipping, representing about 64% of subscriptions by the end of 2010. Greater efforts by the government and regulator have led to higher broadband penetration in Ireland, though the country still ranks near the bottom of OECD countries. In the EU it is ranked above only Greece. The slow process of local loop unbundling is a major reason for Ireland’s poor position: competitors to eircom provide only 34% of broadband lines, whereas in countries with the highest broadband penetration they have at least 50% of broadband lines.

Until 2005 broadband access was among the most expensive in the EU, with average prices about 35%-40% higher than in the UK. Prices have fallen substantially in recent years, redressing the balance, though Ireland remains comparatively expensive and data speeds remain comparatively low.

Key telecom parameters – 2009 – 2011

(Source: BuddeComm)

Market highlights:

• DSL is the principal broadband access technology, representing almost half of all fixed-line accesses, while cable accounts for only about 11%. The number of significant competitors remains small in this market, which the regulator needs to address in order to stimulate the provision of faster network speeds and cheaper prices for consumers.
• The MVNO market remains underdeveloped. Tesco Mobile was the first to launch as an MVNO, in 2007. An Post (Postfone) and JustMobile (from late-2010) are the only other contenders to MNOs. This sector also needs to be encouraged if Ireland’s high mobile phone prices are to reach a par with the EU average. 3 Ireland is well positioned to host MVNOs since the extra bandwidth allocated to it was specifically intended to allow room for them on its network.
• Data revenue as a proportion of total mobile revenue is among the highest in the EU, and should reach above 4% by 2012. MNOs have developed a range of business models to attract consumers and encourage high-end data use (other than SMS). Much of the current use of such services remains through consumer exploration and experimentation. LTE networks are not expected to become commercial until late 2011 or 2012.
• There has been little commercial investment in fibre in Ireland, leaving the principal fibre infrastructure to lie in backhaul. Eircom estimated that the cost of upgrading its access network for FttC at the largest 65% of exchanges (covering about one million lines) would be between €400 million to €500 million, and that an FttH solution could cost above €2,000 per home in new build premises and €2,500 per home in existing properties. The company’s indebtedness has encouraged it to find no the business case to favour FttH, with the results that FttH networks are largely restricted to new-build developments. By 2012 there may still be fewer than 10,000 FttH subscribers in Ireland, representing less than 1% of all broadband subscribers.
• The regulator’s final decision on ASO will seen the process completed in three phases during the first four months of 2012. Released spectrum has yet to be allocated, but is likely to be used for mobile broadband services, in common with developments elsewhere in Europe.
• The chaotic DTTV market remains in limbo. The failure of Boxer (awarded three national DTTV multiplexes) as well as the One Vision consortium was compounded by the refusal of the third bidder for the DTTV service, the Easy TV consortium (comprising RTÉ and Liberty Global), to negotiate with the Broadcasting Authority of Ireland (BAI). The BAI has ruled out introducing commercial DTTV until after analogue TV services are switched off at the end of 2012, with services not to be launched until 2013. all three groups which contested the 2008 DTT contest have withdrawn from the process.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in Ireland. It provides further information on:

• Market liberalisation and regulatory issues;
• The impact of the global economic crisis;
• Telecoms operators – privatisation, acquisitions, new licences;
• Mobile data market developments in coming years in light of spectrum auctions and new license awards in 2010;
• 3G developments, regulatory issues and technologies including HSPA and LTE;
• Broadband migration to an FttH architecture;
• Historical and current subscriber statistics and forecasts;
• ARPU statistics and forecasts.

Data in this report is the latest available at the time of preparation and may not be for the current year.