The telecommunications sector in Spain has been experiencing fierce competition for companies for years; and much more. The emergence of new competitors, fueled by a persistent trade war, the continued power of low-cost operators, and the regulations that encourage them. A framework for reducing average prices that is beneficial to consumersbut it disrupted the affairs of large groups who suffered from this in their calculations.
An ecosystem that results in reduced revenues and profitability and this is also forcing major telecommunications companies to continue making billion-dollar investments in networks, infrastructure and digital technology to respond to the exponential growth of data traffic and not be lost in the age of 5G and artificial intelligence.
The framework of extreme competition and its harmful effects on the business of large companies is a breeding ground for corporate movements that are already being prepared (Merger of Orange Spain and MásMóvil, possible sale of Vodafone Spain after years of job loss, consolidation of independent fiber companies…). This 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 a state that is playing around. One hundred operators registered in mobile and fixed line services. The liberalization that started in 1998 moved the industry from the old system with a single very powerful operator to another system with four large groups (Telefónica, Orange, Vodafone and Más Móvil); a handful smaller but growing rapidly (Digi, Avatel, Finetwork…) and a legion of small operators, to the point of having a hyperlocal fiber company in nearly every major Spanish tourist destination.
According to operators’ estimates, low-cost companies have managed to retain around 60% of all new registrations in the sector for years., both portability (changes of companies where the client retains the previous number) and lines with new numbering. According to the National Markets and Competition Commission (CNMC) consumer trends study, the main reason that drives customers to switch phone and internet service companies is to save on bills.
Large operators are trying to ride the low-cost wave in two ways: paying more with more comprehensive and high-value offers (premium packages with unlimited data consumption, exclusive content…) that allow them to grow in the most profitable and willing customer segment, and also with low-cost offers (Vodafone Lowi in , Simyo in Orange or a few brands of MásMóvil) or setting up their own companies with more tuned-in services (O2 from Telefónica). Despite this, in the last two years the Romanian group Digi has been by far the fastest growing group in the number of customers with its aggressive pricing plan.
Deflationary trend
The weight of low-cost companies in customer movements and the need for all competitors not to lose power in this area Trade war puts the industry on a deflationary trend. Mobile tariffs have become widespread, with limited services under 10 euros per month and fiber services under 20 euros; Prices for more complete packages are also very low.
Despite peak inflation and general increases in many items in the shopping cart, the average price of four-way converged bundles (which include mobile and fixed services in both phone and broadband) was below 43 at the end of last year, according to CNMC. It is the lowest level since it began being measured in monthly euros in a household panel a decade ago. And five-packs (including television) They were sold for an average price of 77 euros, the lowest since 2017..
During Mobile and broadband usage is increasing rapidly (Data traffic in Spain increased by 15% last year, mobile data by 42%) and the growth in the number of users is stable (Spain has more than 58 million mobile lines, 10 million more than residents and fiber to the home) around 17 million ), the sector’s revenue fell.
The industry’s revenue reached a record in 2008: 44 billion euros. Last year, the turnover of all companies in the sector did not reach 34.8 billion, which was 21% less, despite communications and digital services filling everything. The collapse in revenues from retail services to the end customer, which was most affected by the price war, is even greater: from 37,000 million in 2008 to 24,235 million, a decrease of 34% less. The industry has lost more than a third of its retail sales over the last 15 years.
The European Commission has been promoting the liberalization of the sector based on maximizing it for almost three decades. competition to ensure affordable prices for citizens and companies. The Community strategy actively aims to guarantee the existence of four reference operators capable of competing in each national market; National regulations that encouraged the emergence of new competitors were removed, and these operators were guaranteed access to large group networks at regulated prices. and Everything was completed when Brussels vetoed or imposed onerous conditions on some merger transactions between the companies involved.
The second and fourth operators, Orange España and MásMóvil, are awaiting approval from the European Commission to merge their businesses and create a national giant. The two companies and their major rivals in the Spanish market are demanding that the operation be allowed without imposing harsh conditions on the transfer of assets in order to advance the consolidation of the sector. Major companies fear that the decision will once again aim to encourage a fourth operator (of which Digi is best positioned) and will not allow progress towards a more rationalization of the damaged business.