Industry Trend Analysis - Telecoms Market Increasingly National, A Challenge For Regional Players - MAY 2017

BMI View: The Spanish market is beco ming increasingly national and regional players are struggling with scale as full convergence becomes the main strategy. This in turn raises iss ues with Telefonica's dominance in advanced services, such as fibre, a concern that is not only Spanish but European.

Telefonica and Vodafone have reached an agreement which will give Vodafone wholesale access to Telefonica's fibre network. This will cover areas that were included in recent wholesale regulation, as well as areas where the incumbent has no obligations to share its networ k (see ' Competition Can Only Happen If Networks Are Available ' , November 19 2015). At the same time, Zegona, owner of Telecable, and Euskaltel have entered talks about a merger. This would be required to gain greater scale in a market now dominated by four national converged players, with the incumbent having a key role through its development of advanced services on a national level.

Ever since Telefonica launched Fusion in 2012, there has been a movement towards convergence in the Spanish telecoms market (see ' Convergence Must Drive Fourth Player ' , March 21 2016). Vodafone acquired ONO and Orange acquired Jazztel to improve their fixed capabilities, with the latest deal, MasMovil acquiring Yoigo, creating a fourth converged nationwide player, as the company had also acquired some of Jazztel's assets, divested by Orange as part of the conditions of its deal. This has increased pressure on regional players, which do not have the scale to offer a similar range of services. Euskaltel has already acquired R, and adding Telecable would obviously increase its scale in the North-West of the country, but it will continue to lack full convergence, operating as a MVNO only, as the market becomes increasingly national and not regional in nature.

Convergence Driving Market
Telefonica Fusion Customers (mn), 2015-2016
Source: Telefonica, BMI

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