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

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

Spain’s telecom market is one of the largest in Europe, accounting for around 4% of the country’s GDP. The market’s value fell by about 5.4% in 2009, to some €41.7 billion, largely due to the continuing economic crisis which has severely dampened consumer spend in all sectors. It is unlikely to show real growth until 2011. Sector investment has also hit hard: the crisis of liquidity reduced investment by 15% in 2008, while a continuing lack of confidence in the markets reduced it by a further 17% in 2009. This has had knock-on effects on many levels, leading to operators being unable to fulfil their network upgrade commitments and to downsize their targets.

Of total turnover, the fixed-line sector accounted for about €6.2 billion and the mobile sector for about €14.6 billion: the fixed-voice sector continues to shrink as VoIP and mobile services gain in popularity, while almost half of fixed telephone lines are now bundled with other services, especially broadband. This bundling has enabled alternative operators to gain market share. The broadband sector has been the catalyst for the market’s main activity - together with data traffic on mobile networks, these were the only areas that have shown positive growth.

Despite economic difficulties, Spain continues to pursue one of Europe’s more ambitious telecom infrastructure schemes – the second phase of the national Avanza Plan, to run through to 2012, will provide further impetus to R&D investment and increase the volume of economic activity relating to the use of ICTs. The Plan has thus far been allocated about €6.6 billion in public funds.

The regulator expected that about half of households will be served by FttH within the next 10-12 years, with most accesses provided by Telefónica and alternative operators to which Telefónica must provide network access. The regulator is ambitious in its expectation of the number of competitors which will service urban areas, and since no significant operator presence is expected in regions with fewer than 5,000 people it must anticipate contributing substantial public funds.

Indeed, the regulator’s calculations may prove to be wildly optimistic, in that there is hardly any other country which anticipates competing fibre-optic infrastructures in towns with fewer than 100,000 inhabitants.

Overall, FttH deployments in Spain have been hampered by a continuing lack of investment in NGNs by most network operators, with the result that FttH is generally offered only by small regional operators. Telefónica’s FttH network is geographically limited, while other operators such as Orange and ONO are not investing in FttH on a large scale: Orange has trialled FttH while ONO has concentrated on delivering EuroDOCSIS 3.0 technology to deliver 100Mb/s services. As a result, whereas in other European markets where operators have tended to concentrate on high-density towns (Paris, Milan, Amsterdam), in Spain FttH is more widely available in villages and rural areas, largely through municipal-led efforts.

In the mobile sector, the number of subscribers grew 4% in 2009 and voice traffic increased by about the same, though service revenue fell 4.7%. This was largely the result of cuts in mobile termination rates (MTRs) and lower voice and data roaming charges imposed by the regulator, as well as competition which has brought down the average price of mobile phone calls by 5.7% in 2009 alone. This drop is in line with the trend seen in previous years, and it is likely to continue into 2011 though the focus will be on the competitive mobile data sector.

Spain – key telecom parameters – 2010 - 2011

(Source: BuddeComm)

Market highlights

• IPTV has become increasingly popular in Spain, either as a standalone service or, more normally, as part of a bundled offer. IPTV really began to take off in 2006 when network upgrades in both the cable and DSL sectors allowed high-bandwidth applications to reach a good proportion of the population, and as providers started to offer numerous channels to attract and retain customer interest. By early 2010, IPTV had reached about 21% of homes, and Spain had the second highest take-up of IPTV in Europe, after France. Nevertheless, the market is dominated by Telefónica, which stands to gain in coming years from the failure of its main competitor, Jazztelia.
• Although the government prepared a legal framework for mobile TV services through DVB-H, and allowed for a digital mux to supply 20 mobile TV channels simultaneously, the service has been put on hold through lack of consumer demand and the absence of viable business models from operators. As a result, in 2011 the frequencies assigned to mobile TV may be allocated to other services.
• Telefónica and Jazztel operate the country’s most advanced NGNs, which should serve up to half of the country’s households with FttH by 2023. Regulations mean that Telefónica must provide duct access to alternative operators at the same price it charges its own FttH operations. Most smaller towns will be served by Telefónica and at least one alternative operator, providing realistic competition. The estimated payback time for alternative operators in the major cities would be between 9 and 12 years, increasing to 13 to 14 years for towns and cities with a population between 5,000 and 50,000.
• Intense competition in the mobile market has led to lower prices for consumers and more generous data offers from providers. Regulations simplifying mobile number portability led to the transfer of 4.5 ported numbers in 2009 alone. As a result, the TeliaSonera-owned Yoigo, having experienced a tortuous inception in this market, has captured a 6% share of the mobile market by subscribers.
• Mobile broadband is among the telecom’s sector’s strongest cards, with the number of subscribers to mobile datacards growing 65% in 2009. Datacard penetration should reach about 15% of all mobile phone users by 2011, placing additional pressure on the ability of HSPA and future LTE networks to cope with traffic demand.

For those needing high level strategic information and objective analysis on the telecommunications sector in Spain, this report is essential reading and gives further information on:

• Developments in the digital broadcast market, IPTV and VoD;
• Market liberalisation and regulatory issues;
• The impact of the global economic crisis;
• Telecoms operators – privatisation, acquisitions, new licences;
• Internet and broadband development and growth;
• VoIP, IPTV, VoD, digital TV and DTTV;
• Historical and current subscriber statistics;
• Average Revenue per User (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.