Spain has lived a growth cycle in terms of connectivity for several years, and there are various indicators. Density, speed and interconnection are the three factors that make a telecommunications network valuable and Spain scores top marks on all three. In the European Union coverage report in 2013, Spain only just reached the European average on any of the parameters analysed, whereas in the 2023 Digital Economy and Society Index (DESI) for 2023, Spain boasts a leadership position in the development of telecommunications networks (it was already well on its way in 2021 and 2022, when it ranked third).
There is also more specific data which shows that Spain is far above the EU average in fixed Very High Capacity Network (VHCN) coverage (93% versus 73%). This puts the country on track to reach the Digital Decade target of 100% coverage ahead of schedule. Spain’s strength in fixed networks is also underpinned by its fibre optic (FTTP) coverage (91% versus 56%) and it is the leading country in adoption of fixed broadband of at least 100 Mbps (87%). It is also noteworthy that not only is this infrastructure deployed throughout practically the whole country, but is also used more intensively by the population than in other EU states. Not to mention the fact that, 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 growth in Spanish telcos has traditionally received public sector support, with continuity in recent years of policies supporting the extension of connectivity. A model was designed to support the deployment of broadband in rural areas, which has evolved as the EU state aid framework has changed and has successfully absorbed an increasing amount of financing: €621m between 2013 and 2021 under the Broadband Extension Plan (PEBA in Spanish) and €650m between 2021 and 2023 under the UNICO-Broadband Programme as part of Spain’s Recovery Plan.
However, the private sector has undoubtedly been the driving force behind this growth period and will be going forward. In Spain, the main players operated alongside each other in a highly competitive landscape which, according to data from the Spanish competition authority (CNMC), chalked up investments of more than €50bn between 2013 and 2022. In fact, in the period from 2016 to 2021 alone, Spain could have absorbed approximately 15% of investments by major European operators, exceeding the 10% of the EU population the country represents.
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 rates. Significant turbulence in the telecommunications sector indicates that we are now facing a turning point. The Orange-MásMóvil merger, for example, will shift the long-standing market leader, Telefónica, into second place by number of broadband and mobile customers. This merger could also support the emergence of a new fourth operator, which will see its position in the market buoyed by the merger remedies the European Commission is expected to approve if the deal eventually goes ahead. Elsewhere, the PE firm Zegona has just bought 100% of Vodafone in Spain; the operator’s new strategy and partners are yet to be defined.
The completion of these transactions will shape a new Spanish telecoms market, 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, necessary role, and where new, exciting investment opportunities are arising for operators and investors alike, with end users set to reap the benefits.
The writer is CEO of Avatel Telecom