2011 Spain - Telecoms, IP Networks, Digital Media and Forecasts

Growing FttH subscriber base leading to churn from DSL 

BuddeComm’s quarterly publication, Spain - Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecoms and digital media sectors in one of Europe’s key markets struggling to overcome larger economic difficulties.

Spain’s telecom market is one of the largest in Europe, accounting for around 4% of GDP and directly employing some 71,000 people. In common with other European countries, the market has been affected by the general economic turmoil, which has hit Spain more harshly than most other regional economies. High During the next two to three years government debt is expected to be running far higher than the EU limits set under the now-defunct stability and growth pact which requires an annual budget deficit no higher than 3% of GDP and a national debt lower than 60% of GDP. Financial constraints have impacted the government’s ability to fund national telecom infrastructure projects, and have fast-tracked the sale of a range of mobile spectrum bands.

The new Spanish government, headed by Mariano Rajoy’s Center-right People’s Party (PP) – which replaced the seven-year old Socialist government – has not dampened investor concerns about Spain’s economic recovery despite announcing a new round of measures on bank policies, labour reforms and budget austerity. Yields on three-month bonds reached above 5.1% in late 2011, while the country may need €30 billion in new cuts to reach its deficit target for 2012.

The declining value of the telecom market, worth an estimated €38 billion in 2011 and an expected €37.6 billion in 2012, is mainly attributed to the economic crisis which has severely dampened consumer spend in all sectors. The broadband sector was the single area of positive growth until mid-2010, since when revenue from the sector has fallen by between 1.5% and 2.9% per quarter.

Telefónica controls the bulk of national and local infrastructure. Despite almost a decade since the Spanish telecoms sector was deregulated the incumbent serves 82% of direct accesses and thus dominates the fixed-line market. It also accounts for about 55% of the internet market. Fixed-line operators trying to break Telefónica’s hegemony include ONO, Jazztel, Euskaltel and Orange. Only in mobile telephony does Telefónica face significant competition.

The trend towards market consolidation and the entry of the first MVNOs have resulted in several integrated operators providing greater infrastructure competition: two MVNOs also operate in the fixed and broadband market while several cable operators have launched mobile services following the imposition of access obligations in 2006. Alternative operators have invested in cable and LLU while mobile operators are gradually upgrading networks to provide high-speed data services. Prices have fallen as a result of competition, particularly through bundled offers, and intensive number portability.

Key telecom parameters – 2009; 2012

(Source: BuddeComm)

Market Highlights

• Despite pay-DTTV services being a contentious issue in Spain, government approval for it in 2009 has helped broadcasters struggling to secure revenue in the face of competition from other platforms. Mediapro has successfully commercialise the first pay TV channel, Gol TV, since joined by AXN Spain as the country’s second pay-DTTV channel. Pay-HDTV over DTT has also been supported by the provision that new large TV sets must incorporate an HD tuner.
• Additional frequencies freed up by the digital dividend in the 800MHz band will be auctioned in 2015, following auctions in late 2011. Spectrum in the 2.6GHz band has been offered in line with other European countries, while the refarming of the 900MHz band will enable MNOs to augment their 4G offerings, so alleviating poor broadband connectivity in rural areas.
• Doubts over a viable mobile TV business model remain, leading to continuing caution among providers. The dramatic fall in the number of subscribers in 2011 coincided with the end of a Movistar promotion, suggesting that consumers remain unwilling to pay for the service.
• Growth in the fixed-line broadband market continues steadily, at about 6% in 2011. Movistar’s share of the market has fallen in the wake of competition via LLU, though market share from cable services have been stagnant for several years despite higher capacity available based on the EuroDOCSIS 3.0 standard. The fibre market has shown considerable growth following regulatory measures on network access.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in Spain. 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;
• 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.