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Promising sign of recovery for Spain operators

Spain has been hit hard by the economic downturn, reflected in decreasing revenues for operators. But promising signs of recovery are being reported, such as a growing interest in mobile broadband and social-networking services.

Miguel A. Rodriguez, head of Marketing and Business Development at Ericsson Spain, says many of the large European operators are present in the Spanish telecom market. “New services are often launched earlier here than in other European countries because operators use this market as a testing ground,” he says.

In the mobile segment, there are three dominant players: Movistar (Telefónica), Vodafone, and Orange (France Telecom), with roughly 45, 30, and 20 percent of the market respectively. A fourth, and relatively new player, is Yoigo, with a market share of about two percent. There are also several smaller virtual operators, active in specific market segments or regions.

On the fixed side, incumbent Telefónica is the dominant player, with approximately 75 percent of the number of fixed-lines and 56 percent of broadband lines, and the rest is divided between different regional cable operators and a national cable operator.

There are more than 10 million 3G subscribers in Spain, representing approximately 25 percent of all mobile users, which is more than in most European countries.

The economic crisis has hit Spain hard, perhaps harder than most countries in Europe. Rodriguez says: “On top of the financial meltdown, we also experienced a serious real-estate crisis, which has had a profound effect on consumer spending. The results presented by operators for Q1 2009 all show a three to eight percent decrease in revenues. We have never seen such a rapid fall in operator revenues before in Spain.”

Compounding the crisis and diminishing operator revenue, Rodriguez says, is the fact that many of the approximately four million immigrants that have come to Spain in the last eight years, are now leaving the country because of the difficulty of finding a job.

The average revenue per user (ARPU) is no longer growing in Spain, and revenues are increasingly coming from value-added services, such as multimedia and mobile internet. “Spain is a very competitive market and getting tougher by the day,” Rodriguez says. “And the fact that Telefónica has its headquarters here affects everything in the mobile market and adds to its competitiveness.”

Popular services
Regarding the services that are popular in Spain, Rodriguez says the interest in mobile broadband, through the use of PC cards delivering HSPA connections, is growing very fast. For regional and geographical reasons, the future of mobile broadband in Spain looks bright. The population is concentrated along the coast and to Madrid, so it is less costly to deploy mobile-broadband technologies, rather than fiber, for country-wide coverage, first through 3G/HSPA and later LTE, Rodriguez says

“Additionally, Spain is a country where people like to meet and talk to each other, often in groups,” he says. “So all applications related to messaging and social networking are growing in popularity here and are likely to be successful.”

Regarding business opportunities that still have not been exploited, Rodriguez mentions IPTV and mobile TV as the most important ones in the medium term. “We’re focusing on the TV segment and strongly believe it will be a growth area in Spain,” he says.

Alfonso Aguado, who works in Strategic Marketing at Ericsson Spain, says the country is known as the peer-to-peer kingdom, and there is a big debate in Spain today around file sharing, internet piracy, and network security and integrity for end users. “A view that is becoming more and more accepted in Spain is to limit the data speed available to internet offenders, in contrast to what was recently suggested by the European Union, namely to cut their internet connections all together,” Aguado says. “Our main role is to convince our customers of the need to invest in broadband infrastructure, evolving towards an all-IP environment to drive sustainable business models and to secure new revenue sources.”

Another regulatory debate in Spain today is about reusing the 900MHz band for 3G. Also discussed is the possibility to free spectrum for mobile services that is used by broadcasters. More mobile spectrum is needed to make Spain a leading mobile-broadband country, Aguado says.

A very interesting trend in Spain is a shift in what is seen as the basis of economic growth. “Before the crisis, the model was based on factors such as large construction projects, building houses and highways, for example,” Aguado explains. “Now there is almost a consensus here that information and communication technologies (ICT) will be the base for a new sustainable growth model.

“Considering that Spain is also one of the world leaders in using alternative energy sources, as well as a country where the public awareness of sustainability issues is growing steadily, we believe the use of ICT is going to be extremely important here and we are working hard on convincing politicians, operators, and regulators to go in this direction.”

Working with the developer community
Both Telefónica (Movistar) and Vodafone have been working closely with the developer community for many years. “Telefónica has lots of activities around developers and is perhaps best known for its Mobile Forum initiative,” Rodriguez says. “Vodafone is also very active, but perhaps not as visible.”

Ericsson Spain also cooperates with developers, but on a smaller scale. “For instance, once every year we arrange a one-day seminar to which we invite operators, several Swedish companies and Spanish developers working with Ericsson,” Rodriguez says. “Together, we discuss new business opportunities. Our involvement with developers has been very interesting and productive, and has given us the opportunity to work with some of the most active entrepreneurs in the mobile segment in Spain.”

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