The telecommunications sector in Spain is going over time from a model of three large operators that control the market, to four. A few days ago, MásMóvil absorbed Euskaltel through a bid, confirming itself as the fourth company in Spain, although still one notch below the big three (Movistar, Orange and Vodafone). The rise of MásMóvil and other operators based on a low-cost model has been a challenge for the companies that control the sector, which for some time has already been seen in the erosion of their income and their customer base.
The Orange ERE takes up the layoffs among the large telecoms, which have eliminated 10,000 jobs in five years
Although they have sometimes been answered by companies in the sector, the reference statistics available are those of the National Commission of Markets and Competition (CNMC), which has the functions of supervisor of this industry. This registry, which on a monthly, quarterly or annual basis gives an X-ray of telecommunications, shows in its data the impact that the low-cost boom has had on the three big companies.
In the first place, it can be observed in retail income, those obtained from services to individuals and companies, leaving out those granted to third companies. In 2020, the latest data collected by the CNMC, the three large operators obtained 17,558 million euros of income, leaving far behind the records of other times prior to the 2008 crisis, when the turnover exceeded 27,000 million. But specifically, if compared to 2018, when the low cost ended up becoming strong in Spain, with the proliferation of a multitude of small operators and the rise of some such as the aforementioned MásMóvil based on acquisitions, the loss for the three large companies around 2,000 million.
Since practically 2018, if not before, telecommunications have been living in a continuous price war. Especially in more basic services such as mobile telephony or fiber, where certain actors have appeared that, through aggressive offers, have grown in the sector. This has caused a decrease in the prices of these products. This is also the case of Digi or Virgin Telco, the latter being absorbed by MásMóvil in the Euskaltel operation. Other businesses, such as pay television, are still practically a thing of the three big companies, especially Movistar.
With regard to mobiles, during the first half of this year 3.62 million company changes were made, which practically equals the highest historical record reached, precisely in 2018, with 3.67 million. Last year it was affected by the quarantine, which caused these operations to be frozen by law for a few months to avoid non-essential movements. However, some autumn months reached levels never seen before in Spain, showing the strong movement between operators.
Movistar, Orange and Vodafone have lost 1.2 million customers since 2018
And, month after month, the groups that have traditionally lost out in this war have been the big three operators. If the record of the closing of 2018 is compared, the same reference that was taken with the income, with June 30 of this year, the result is that Movistar, Orange and Vodafone add a loss of 1.2 million customers. Only MásMóvil has gained three million customers in that period, to which are added the profits of other small operators, which are not disaggregated in the CNMC statistics.
Large companies have focused their efforts at this time to retain and attract customers with a higher monthly cost, where pay television plays a fundamental role. Meanwhile, mobile telephony is experiencing a slow but steady loss of joint market share to levels never seen before. This spring, Movistar, Orange and Vodafone accounted for less than 75% of the mobile phone pie in Spain for the first time, far from the 83% they had just four years ago. These companies have tried to cushion the loss in these segments with their second, or even third, brands with which to compete also on price. This has caused a certain mirage in the market that although there are more than twenty brands, they are grouped into just four companies.
The loss of ground for large operators is also seen in other businesses, such as home internet, fixed broadband. Although at the end of 2020 they retained 80% of households in Spain, they had lost seven points of market share in just two years. The domain is maintained, of course, in pay television, where they add up to 92% of the income, despite having 75% of the subscribers, the clients with football being very much to blame for this, which raises the average bill that is paid.
Criticisms of the big operators
This reality has led to increased criticism in the last year in the speeches of the managers of the country’s large telecos against regulators due to the proliferation of low-cost operators. Not only in Spain, but at the European level. Executives have repeatedly charged against competition rules that, according to them, have encouraged the creation of operators that are committed to competing on prices, while large companies, with lower margins for these new players, have to address investments in infrastructure. José María Álvarez Pallete himself, president of Telefónica, has become a critical voice against the regulation of the sector, which he has sometimes called “obsolete”, where there are companies that grow “at the cost of weakening those who have a firm investment commitment, seriously undermining its ability to lead the digitization of society and therefore harming it, “he said a few months ago.
Before the summer, Orange, which this Tuesday confirmed the elimination of its historic brand Amena, announced an ERE that affected some 400 workers in Spain. The company justified it for “spending years” chaining revenue losses “as a result of the hypercompetitiveness of the market and the multiplicity of players low cost“In other words, the French telecom company, whose main shareholder is the French State, proposes this way to try to compete in the price war that has affected the sector in recent years.” To guarantee the competitiveness of the company, it is essential to adapt the operation to these structural changes, “the group defended in a statement. The French parent company has had to cut the book value of its Spanish subsidiary by half, justifying it in this price war.
Of course, the boom of the brands low cost in Spain it has a second derivative that is not so negative for the big telecos. Many of these companies do not have their own infrastructure, so they rent it, especially from Telefónica, Orange and Vodafone, in order to offer their services. Thus, if one of these companies increases its income, so will those of the big three indirectly. In fact, while these companies’ retail revenues have fallen, wholesalers have risen in the last two years by almost € 500 million, to exceed € 7 billion, their highest level.
The companies of the sector face in the coming weeks a ‘back to school’ in which they play an important part of the evolution of their business. With the end of the summer holidays, many seek to position themselves to attract customers, with temporary offers on television, in football or online. It will also be the first campaign after the last pending 5G auction, which is why commercial campaigns around this new technology will proliferate.