Spanish mobile market contracts 13%, will Yoigo survive as 4th MNO?

Monday 20 April 2015 | 14:35 CET | Background

Spanish mobile operators are turning to consolidation opportunities and developing low-cost offers in an attempt to weather the continued erosion in service revenues. In 2014, mobile service revenues fell sharply again, by 12.8 percent to EUR 10.2 billion, according to the latest figures from Telecompaper. Vodafone gained market share in the past year, strengthened by its acquisition of Ono, while Orange's pending takeover of Jazztel could see it gain a new foothold in the market. These takeovers aside, Spain remains a market with four mobile network operators, and the smallest, Yoigo is still stuck at around 6 percent market share. Yoigo is focusing on low prices to grow further and may be in line to acquire fresh assets from Orange-Jazztel in order to boost its position. 

Drop in service revenues slows in Q4

Mobile service revenues in Spain fell 7.2 percent year-on-year to EUR 2.5 billion in Q4 2014. This suggests the market trend is improving, after double-digit drops in the five previous quarters. The decrease was mostly caused by the price war on convergent offers, the continued macroeconomic pressure driving consumers to SIM-only offers and the lingering effects of the last MTR cut. 

Telecompaper’s semi-annual EU benchmark report shows that prices have fallen considerably in Spain but may be starting to stabilise. The report compares the median monthly TCO (total cost of ownership) for mobile service plans, including monthly fees, promotions and connection costs. The graph below shows the development of the median TCO of SIM-only plans with more than 1,000 minutes and more than 2GB per month, comparing Spain to the median TCO in Telecompaper's 16 European countries covered.

The gradual expansion of 4G services is doing little so far to compensate the price pressure, as 4G is included free in almost all plans (except the cheapest plan at Vodafone and Movistar’s low-cost brand Tuenti). At the end of 2014, Vodafone covered 69 percent of the country with 4G, Orange 70 percent, Movistar 58 percent and Yoigo 53 percent. Orange claimed the most 4G customers at 2.3 million or 18 percent of its mobile customer base (excl M2M), followed by Vodafone with 2.2 million (15%) and Movistar at 1.8 million (11%). Yoigo did not report 4G customer numbers.

Low-cost MVNOs, second brands increase competition

With consumers focused on low-price, SIM-only offers, Vodafone Spain created the new low-cost brand Lowi at the end of 2014. This is similar to Orange’s Amena brand and Simyo, which it acquired from KPN. Movistar is focusing on the Tuenti Movil offer, which recently passed 240,000 customers.These second brands are designed to compete with the around 50 MVNOs in Spain. 

According to the Spanish telecommunications regulator, there were 8.2 million MVNO subscribers at the end of 2014, equal to around 16 percent of the total Sim base. The MVNOs gained 1.7 million customers in the past year, showing they are clearly able to take customers from the MNOs. Movistar and Vodafone were the main losers, shedding together more than 1.3 million customers in 2014. 

Jazztel was one of the largest MVNOs in Spain with almost 1.9 million subscribers at the end of 2014. This would provide a substantial boost to Orange’s market share if it completes the acquisition. 

Another important player in the MVNO market is Masmovil Ibercom Group, which recently acquired several other virtual players (Happy Movil, Neo which has a 4G licence and UppMobile). Masmovil also plans to list on Spain’s stock market this year and launch its own fibre broadband offers. Masmovil wants to take advantage of changes proposed by regulator CNMC for access to Telefonica’s fibre network. Under the CNMC’s proposals, Telefonica would be required to provide wholesale access in all of Spain apart from nine cities. In those nine cities, MasMovil is hoping to provide broadband at up to 100 Mbps using 4G wireless technology.

Movistar losing share to Vodafone, Yoigo smallest but working on expansion

Among the four MNOs, market leader Movistar has been steadily losing market share, mainly to Vodafone, which has been the main winner in the market. Vodafone kept its revenues relatively stable last year, helped by its takeover of cable operator Ono. Orange remains in third place in terms of service revenue, with a fairly stable market share. 

Spain's fourth mobile network operator, Yoigo remains small, with just over 6 percent of service revenues. The company is still trying to shake up the market and recently introduced an affordable unlimited tariff with up to 20GB at 4G speeds for EUR 29 per month. According to the Yoigo’s CEO, the company’s unique low-cost structure allows it to continue to reduce prices. Yoigo is also interested in acquiring fixed and mobile assets from Orange, which may need to divest some activities in order to gain the EC's approval for its takeover of Jazztel. This could create a fourth major telecoms operator and give Yoigo more power to compete with Movistar, Orange and Vodafone. Yoigo’s position remains tenuous though, amid the pressure to consolidate already seen in other markets such as Germany, France and the UK.

The above figures are based on Telecompaper’s database on the Spanish mobile market, which is available for purchase. Included graph on TCO information is based on our upcoming Q1 2015 release of our previous EU Benchmark report. For more information, click here.


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