2012 Ireland - Telecoms, IP Networks, Digital Media and Forecasts

Eircom succumbs to Ireland’s economic pressures

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 €90 billion as a bailout from the EU and IMF in late 2010, while a four-year economic plan was devised aimed at driving down the country’s deficit from 12% to 3% of GDP by the end of 2015 by cutting €15 billion off state spending. Ireland’s last three budgets have already cut public spending by up to €14 billion. In early 2011 a new coalition government was formed between Fine Gael and Labour to help push through a revised economic programme.

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 faced reduced revenue and with it the cash 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 GDP and telecom revenue have declined. Nevertheless, the contribution of the telecom sector to GDP has grown during the last three years, suggesting that the sector 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 Although blended ARPU has continued to fall steadily, it remains among the highest in the EU. Despite economic constraints ARPU should remain stable towards the end of 2012 as increased mobile data traffic outweighs a shift to prepaid usage among consumers.

Growth in the number of broadband subscriptions has slowed in recent quarters and is largely propped up by the mobile broadband sector. DSL remains the dominant platform, though a gradual shift to FttX networks will see this dominance decline in coming years. The cable sector has been supported by UPC’s investment in DOCSIS 3.0 technology, which provides considerably higher data rates than is currently possible through DSL.

Eircom’s dominance in the broadband market is gradually slipping, representing about 65% of subscriptions by the beginning of 2012. 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 LLU is a major reason for Ireland’s poor position: competitors via LLU provide only about 9% of all DSL accesses.

Key telecom parameters – 2010; 2012

(Source: BuddeComm)

Market Highlights

• Ireland’s FttX networks have developed slowly as a result of eircom’s financial constraints. The cost of extending network builds beyond certain exchanges in the main towns remain prohibitive and so further developments during the next few years will be restricted. The absence of a regulatory mechanism to encourage network construction and investment has added to the sector’s difficulties.
• The MVNO market remains underdeveloped, with few operators involved. In early 2012 an existing MNO, O2, launch its own low-cost service targeted at the youth market.
• The regulator’s final decision on ASO will see the process completed in three phases during the first four months of 2012. Released digital dividend spectrum will be auctioned as part of the government’s efforts to raise €700 million, so fulfilling financial conditions reached with the EU and IMF.
• 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;
• 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.