Changes of telephone operator fall to levels prior to 2018, when the low cost battle began

The strong competition between telephone operators has taken a short break in 2022. The explosion of low cost almost five years ago intensified the changes of company between clients during these years, reaching records never seen in the statistics of the sector. Now, the data for the first half of the year, prepared by the National Commission for Markets and Competition (CNMC), show a more relaxed scenario. The transfer of consumers from one brand to another has dropped by 10% compared to last year.

Between January and June of this year there have been 3.2 million portability. That is, changes between operators. The figure is still very high, but it is already below the data of the last courses and is close to the records prior to the start of the low cost battle, when small companies stood up to the big ones with low price offers.

There is an exception to this statistic and it is that of 2020. During the quarantine, the Government limited telephony portability for several months in an attempt to reduce the need for face-to-face contact and travel as much as possible. This limited the number of changes during the first half of the year, although in the following months it skyrocketed. In fact, for weeks, historical records were produced with rhythms never before seen in the sector.

The telecommunications sector has been marked for years by the price pressure that small operators have exerted on the big ones. This is a fact that is not limited only to Spain, but has been a common situation in Europe. The big companies have seen how for years they have lost billions of euros in income due to small operators that were committed to growing at low cost, which forced them to enter into that battle with their second or third brands. This matter has been the subject of justification among the big players in the sector to request regulatory changes and facilitate mergers.

Now, porting data points to a reduction in this strong competition. In the sector, they are committed to being cautious and not ending the battle that has eroded the accounts of large companies these years. Not surprisingly, the retail activity of telecommunications companies closed 2021 with 23,115 million euros in revenue, being the lowest figure in the entire statistical series collected by the CNMC, which dates back to 2005. There are 1,800 million euros missing since that the 'low cost' boom began in 2018.

However, different sources from the sector consulted do recognize that there is a "promotional cooling". In other words, it is being appreciated that the intensity of offers that existed in recent years is not being replicated during this year, which has led to a drop in operator changes. These sources attribute it especially to what is called "medium and high value", which refers to products that bundle several services and have a higher cost than the rest of the operator's services. In this field, the one that especially interests the big operators, it has had fewer promotions. The pressure remains, however, on low cost, these sources point out.

Mobile portability data serve as an indication of how the telephony sector is evolving and the competitive pressure that operators exert on each other. It is also the business where the operators see the emergence of smaller companies that carve out a niche for themselves in the sector and 'steal' customers from them, while they launch their biggest bets in other fields where the margins are higher.

The evolution of recent years shows how the three large companies, Telefónica, Orange and Vodafone, have been losing customers based on the smaller ones. During the first half of this year, this trio has seen a combined 430,000 customers disappear. Although the level has been intense, as is the case with the porting trend, the large companies in the sector have seen their loss of clients moderate this year. This negative balance has also slowed down by 10%. Movistar and Vodafone register a less negative evolution than in the same period of 2021 and Orange worsens it.

While the big operators have lost customers, they have been gained by other smaller companies that have carved out a niche for themselves in the telephony and fiber market in Spain, fundamentally fighting the 'low cost' battle. This is how the company that ultimately became the fourth largest operator in the market, MásMóvil, gained prominence in the competition. The company has also been gaining clients based on the acquisition of small territorial operators. The last one, Euskaltel, which had the fifth largest market share in the country. In recent times, other firms such as Digi have led the greatest growth in the market.

Virtual Mobile Operators (MVNO) are mostly small telecoms that use infrastructure rentals from larger companies to offer their services. Digi is one of them, although there are also other names like Adamo or Finetwork, which have been gaining prominence in recent years. MVNOs have gained 368,000 new customers in the first six months of the year, according to CNMC records. Although they have had a setback compared to the gain of the same period of 2021, it is their second best record in the Competition statistical series.

Over the next few months, a profound change is expected in the sector in Spain. Orange and MásMóvil are already working on their merger after having finalized before the summer the definitive details of the union of what will be the first operator in the sector in some businesses, such as mobile telephony. When these two groups come together, which in the future have set the objective of going public, the three main brands in the sector will have 94% of the mobile lines in Spain. This joint market share will even reach 97% in other businesses such as home internet.

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