IHS Global Insight Perspective | |
Significance | The National Competition Commission thinks that the wholesale SMS and MMS charges to MVNOs are excessive. |
Implications | The report is likely to call for reduced charges to increase competition. |
Outlook | As Spanish mobile operators are struggling with falling revenues, there will be heavy protests from the operators. |
Spain’s National Competition Commission has announced that it is to initiate an investigation into the wholesale prices that Spain’s three GSM mobile network operators charge MVNOs operating on their networks. The commission said in its announcement that it believes current wholesale SMS and MMS prices charged by Telefónica, Orange Spain, and Vodafone Spain to be excessive. It is due to report its findings by June 2012.
Spain has a well-developed MVNO market, with 16 MVNOs at end-2008. At the end of November 2010, MVNOs had a 3.49% share of the subscriber market (see Spain: 6 January 2010: Spanish Mobile Market Up 2.6% in November 2010—Regulator).
Outlook and Implications
- Spanish Operators Struggling: The prospect of fines, further regulation and decreased revenues for Spain’s three largest mobile operators will add further woes to a depressed market. The three operators reported dismal third-quarter results and saw decreased revenues at their mobile divisions: Telefónica saw its mobile revenues drop 5.5%; Orange Spain’s mobile division reported organic growth of -1.0%; and Vodafone Spain saw its total revenues fall by 7.9%, including a plunge of 14.3% in its core mobile-voice revenues. As a result, the operators will begin to put pressure on the competition authority to try and minimise the impact of its report.
- Moves to Increase Competition: Despite the competition authority noting in the announcement that its belief that prices are excessive will not prejudice the investigation, the likely result of the report will be that the maximum wholesale price for SMS and MMS will decrease. The operators would do well to reduce the charges ahead of the report, so as to try and limit the impact. Moves to reduce the wholesale charges would increase competition in the market and will be welcomed by the MVNOs.
- New Regulation Incoming: The announcement from the competition commission comes as the Spanish government is updating its telecoms laws (see Spain: 15 December 2010: Government to Update Spanish Telecoms Law). The proposed laws include provision for a secondary spectrum market, enshrining the principle of technological neutrality, also stipulating that the regulator must take investment risk into account when imposing conditions and obligations for network access.
- Long-Term Risks to Telefónica from Cable Operators: With further MVNO-friendly regulation likely to be the result of this investigation, the largest risk to Telefónica’s dominance comes from the cable operators. MVNOs are already a growing presence in the broadband and MVNO markets. There is the prospect of the cable operators getting spectrum as part of the new telecoms bill (see Spain: 4 January 2010: Spectrum to be Reserved for Regional Spanish Operators). Turning from MVNOs to network operators, if only in some regions, would greatly enhance the triple- and quadruple-play packages cable operators would be able to provide, increasing their attractiveness to consumers.