Pyramid: Mañana Looks Brighter for Spain

The Spanish telecom services sector was hit hard by the 2009 global economic downturn, but it's set to bounce back in the next few years, fueled by growing demand for mobile data services.

That's the main finding of a new report from Pyramid Research , "Spain: Some Signs of Recovery in the Telecom Sector."

According to the report, the Spanish telecom services market was worth €28.6 billion (US$39.8 billion) in 2009, down 6 percent compared with 2008. Mobile average revenue per subscriber (ARPS) numbers were particularly affected as consumers, reacting to a drop in their disposable income, cut their spending on voice and data services. All three of Spain's major mobile operators -- Telefónica SA (NYSE: TEF), Vodafone España S.A. , and Orange Spain -- suffered ARPS declines, with Vodafone España experiencing the sharpest decline in 2009, according to the report.

And as consumers put the brakes on their spending levels, so the operators followed suit: Telefónica cut its annual capex by 15.6 percent, Vodafone España by 12 percent, and Orange Spain by a startling 22.6 percent.

The future, however, looks brighter. The report's author, Stela Bokun, predicts that total market revenue will grow at a compound annual growth rate (CAGR) of 2.7 percent between 2009 and 2014, representing a cumulative revenue opportunity of €181 billion ($257 billion).

One of the key growth areas, according to Bokun, will be 3G mobile services. She predicts that by 2014, 3G users will make up 83 percent of total mobile subscriptions, up from 50 percent in 2009.

And the Spanish market is already gearing up for the deployment of proto-4G Long Term Evolution (LTE) networks. Bokun expects 7 percent of Spain's 60 million-plus mobile subscriptions to be for LTE services by 2014, with Telefónica and Vodafone España identified as the likely trendsetters. Vodafone España demonstrated live LTE connections in Barcelona earlier this year, while Telefónica's LTE trials are underway. (See Telefonica Lab Tests NEC LTE and Telefónica Kicks Off LTE Trials.)

Mobile data market growth will also be fueled by the significant uptake of data cards and a rapid increase in the number of M2M (machine-to-machine) connections, according to the report.

In the fixed-line market, Bokun expects to see fiber access broadband subscriptions to grow during the next four years. According to the report, just 1 percent of Spain’s non-mobile access lines (PSTN, ISDN, DSL, cable, FTTx) were fiber-based in 2009, but this is set to rise to 5 percent by 2014. That, in turn, will help fuel the uptake of bandwidth-hungry services like IPTV.

But while the overall Spanish market is set for growth during the next few years, incumbent operator Telefónica is expected to come under increasing pressure from its rivals in the fixed and mobile markets. Bokun expects the national operator, which has just reported first-quarter financial results, to see its share of overall telecom services revenues shrink from 55 percent in 2009 to 48 percent in 2014. Fortunately for Telefónica, it has its Latin American assets to help boost its top and bottom lines. (See Telefónica Reports Q1, Nobody's Perfect, and Telefónica €5.7B Bid for Vivo Rejected.)

— Paul Rainford, freelance editor, special to Light Reading

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