Spanish mobile market under pressure in 2012, service revenue drops 11%

Tuesday 9 April 2013 | 17:04 CET | Background

Spain's mobile sector contracted sharply in 2012, both in terms of customers (-9%) and service revenues (-11%). The deterioration was due to a combination of effects, including the country's economic crisis, a large clean-up of inactive subscribers by the operators, the withdrawal of handset subsidies and regulation mainly of voice revenues. Below we outline the most important figures based on Telecompaper's database on the Spanish mobile market.

Mobile lines down 9%; Orange and Yoigo increase market shares

The Spanish mobile network operator market consists of three larger operators (Movistar, Vodafone and Orange) and Yoigo (a small player owned by TeliaSonera). Yoigo was up for sale, but recently TeliaSonera announced it had abandoned the sale process and would continue to develop the business unit. 

Looking at the total mobile base reported by these four MNOs, the Spanish market lost 5.1 million connections (9%) in 2012 and 1.3 million (2.4%) during the fourth quarter alone, to reach at total of 51.4 million at year-end. It should be noted this excludes MVNOs at all operators, but includes M2M connections within the reported connections of Movistar and Orange.

Of the 5.1 million mobile lines lost, almost 3.8 million were prepaid, while postpaid only dropped 1.3 million. As a result, the share of postpaid in the total base increased to 69 percent at the end of 2012, versus 65.2 percent a year earlier. Movistar and Vodafone lost the most in prepaid and were also the only operators to show a net loss in postpaid connections. The drop in customer numbers was mainly due to disconnections of inactive customers (mainly prepaid) and fewer customers taking a second mobile SIM, likely due to the difficult economic climate. The withdrawal of handset subsidies by both Movistar (March 2012) and Vodafone (April 2012) also contributed to the postpaid decline. Vodafone reintroduced postpaid subsidies in the third quarter of 2012, but according to the company it was still feeling the effects in Q4 2012. 

Overall this led to Movistar's market share dropping by 2.9 percent points annually to 39.9 percent of customers, while Vodafone lost 1.4 percent year-on-year to 29.8 percent. In contrast Orange and Yoigo were able to grow their customer bases and as such increase their market share to respectively 23.0 percent and 7.2 percent at the end of 2012.

Figure 1. Mobile connections of Spanish MNOs (in millions and % share), end-2011 vs end-2012. 

Mobile service revenue drops 11% in 2012

Spanish mobile service revenues reported by the four MNOs fell by 11.3 percent to EUR 13.4 billion in 2012, compared to EUR 15.1 billion a year earlier. The main reason was the strong drop in voice revenue, hurt by the weak economy and regulation. Voice revenues, which accounted for 73 percent of total revenues, dropped by EUR 1.8 billion or 15.9 percent compared to 2011. All the operators said revenues were impacted by the macroeconomic weakness, competition and regulation.

In terms of regulation, the Spanish regulator CMT approved a new series of cuts in mobile termination rates. The two-year glide path includes cuts every six months, starting in April 2012 until July 2013. Mobile termination rates for the three main operators Movistar, Vodafone Spain and Orange Spain will be reduced by nearly 75 percent, from 4 eurocents per minute to 1.09 eurocents.

The economic weakness along with high unemployment has damaged consumer confidence, as customers continued to reduce or optimize their spending. Growth in non-voice services was not able to compensate for the large drop in voice revenue. Non-voice, including SMS and data, only increased by EUR 133 million or 3.8 percent to a total EUR 3.6 billion in revenues in 2012, equal to 27 percent of total service revenue.

The relatively low share of non-voice in total service revenues in Spain is due to the lower smartphone penetration, combined with the weak economy, in our opinion. Nevertheless, smartphone penetration has increased in Spain, reaching according to Vodafone 47.3 percent of its registered customers (excluding data-only SIMs), versus 35.5 percent at the end of 2011. Of these smartphone users, more than two-thirds have an integrated data tariff, data add-on or data usage entitlement as part of their committed fee. 

Orange Spain reports that 40 percent of its customer base at the end of 2012 had a smartphone. Telefonica and Yoigo do not report on this, making calculation of a national figure difficult. According to ComScore, which bases its data on a survey, Spain had a smartphone penetration of 66 percent at the end of 2012, but we believe this to be on the high side as this would imply a smartphone penetration of over 90 percent at Movistar.

Looking at the individual performances of the MNOs, Movistar and Vodafone showed the biggest drops in mobile service revenues in 2012 (down in double digits), while Orange only lost 2.5 percent. Yoigo outperformed them all and grew its mobile service revenue by 8.9 percent (it must be noted this operator does include handset sales in its reported revenue). In terms of revenue market shares, the smaller players Orange and Yoigo increased their shares at the expense of incumbent players Movistar and Vodafone.

The above figures are based on Telecompaper’s database on the Spanish mobile market, which are available for purchase. For more information, click here.

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