The European markets show some similarities, but some differences are clear.
- The former PTT (incumbent) is a stable and strong player in all countries.
- Cable operators are highly profitable and provide dynamic competition, based around their network coverage. In all cases, a merger with a mobile operator has already taken place (France, Belgium, Germany) or planned (Netherlands, and possibly the UK, as Virgin Media/Liberty Global plays Vodafone off O2).
- Satellite is traditionally strong in the UK, Germany and France, but less so in Belgium and the Netherlands due to the extensive cable presence.
- There are three (Germany, Belgium) or four (UK, Netherlands, France) mobile operators. A return to three in the UK appears unlikely at the moment, but could happen sooner in the Netherlands due to the two weakest players.
- There are usually dozens of MVNOs.
- The strength of virtual fixed operators varies considerably. In the Netherlands and France they play only a small role (around 10 percent of the consumer market in the Netherlands). Orange Belgium has started trying to create a position as a virtual cable operator, but there are otherwise few worthy challengers in Belgium. In the UK and Germany they play a much stronger role. Unbundling, which in the Netherlands is really only possible over FTTH now, plays a role.
- Fibre is developing rapidly in the Netherlands, even if KPN has stopped reporting on it and Ziggo/Vodafone are unlikely to choose for fibre. France also has a vibrant fibre culture, while Germany and the UK only have regional pockets of development. In Belgium fibre is practically non-existent.
With all this in mind, the Netherlands resembles out of all the markets Belgium the most. The open cable networks in Belgium have allowed Orange to swap its unsuccessful wholesale deal with Proximus and satellite TV for a deal with the cable operators. An open cable scenario is something that the Netherlands may also face, given the planned merger between Ziggo and and Vodafone. Even without open cable though, there is an apparently good wholesale offer from KPN, so there is little fundamental difference.
A situation with two big operators, both active exclusively on their own infrastructure, makes competition difficult. This is clearly where Belgium is at and what is also threatening the UK. Smaller players, dependent on the two market leaders for fixed and/or mobile access, suffer from low margins (high opex), but don't have to invest as much (low capex). We have seen that in the bigger countries, likely due to the greater possible scale, they are able to develop sufficient strength based on healthy free cash flow. This is not so easy in the Netherlands and Belgium. Consolidation and a healthy wholesale market (ie, open cable) can help ensure their viability for the longer term.
