Spain is the leading EU country in terms of Very High-Capacity Network (VHCN) coverage (93% versus an average of 73%) and Fibre To The Premises (FTTP) coverage (91% vs. 56%), and also has the highest adoption rate of 100 Mbps + broadband (87%). Not only is almost the entire country benefitting from deployed infrastructure, it is also used more intensively by the Spanish population than other European countries. What's more, thanks to its unique geographical location, the Iberian Peninsula is an intercontinental communications hub, comprising a network of 37 undersea fibre optic cables out of a total of 436 worldwide.
This data shows clearly that the landscape for telecommunications companies operating in Spain is highly competitive. However, it is also an attractive sector and one which is crucial for the transformation of the broader business system and for social wellbeing, with strong upside potential and some interesting challenges ahead: the sector must improve sustainability, invest heavily in infrastructure, step up digitalisation and meet the need for training and talent in technology.
Against this backdrop, the market is seeing increasing corporate transactions – in search of synergies and other efficiencies – and new commercial strategies aimed at securing a more prominent competitive position in response to high customer turnover or “churn”. A slew of corporate transactions between the main Spanish operators is set to restructure the market over the months ahead. In fact, in Spain there have been major deals in the sector in recent years that have reduced the number of players in the market. One such deal was the takeover bid by MásMóvil for Euskaltel in 2021. Prior to that, Vodafone bought Ono in 2014 and MásMóvil acquired Yoigo in 2016.
All eyes in the market are currently on the Orange-MásMóvil merger, ahead of a definitive decision by the European Commission, expected in the first quarter of this year. The merger, valued at €18bn, will create the largest Spanish operator by number of mobile and broadband customers, overtaking the long-standing market leader, Telefónica. Elsewhere, Zegona is buying Vodafone Spain for almost €5bn; the company’s new strategy and partnerships are yet to be defined.
In this environment, it is the challenger operators that offer the most upside potential. As the traditional major players have gradually lost market share, the operators categorised by the Spanish competition authority, the CNMC, as “alternative” operators have gradually increased their own. At the end of 2022, these operators accounted for 20.3% of total retail revenues in the Spanish telecoms market.
These companies are following their roadmaps, focusing on organic and inorganic growth strategies and on the often overlooked, yet absolutely crucial, less populated areas in Spain; essentially, small and mid-sized towns. Historic relocations, the lack of a business activity and the absence of any plans have caused these cities to fall into decline. It is a global phenomenon which has opened chasms between New York and inland US states, London and the rest of the UK, Paris and the rest of France, and Milan and southern Italy, among many other examples.
To bridge this digital divide and promote employment and regeneration in these areas, a strong, well-developed communications structure is critical. It is not simply about improving or building infrastructure; it is about ensuring that these are fully harnessed, in terms of reindustrialisation, employment, improving citizens’ quality of life, and building future potential. Some companies have been active in this respect for a long time, and others have taken too long.
When these corporate telco deals go through, they will completely reshape the Spanish telecoms sector, which will also be impacted by the reconfiguration underway in the European market. A strong, dynamic market which represents a huge competitive advantage for Spain in a global economic landscape where technology plays an increasingly prominent and necessary role – especially for those less populated areas – and where new, exciting investment opportunities are arising for operators and investors alike, with both end users and operators set to reap the benefits. Today, the Spanish telco market offers a timely upside.
