Telefónica, Vodafone, Orange and MásMóvil to Increase Revenues After Tariff Hikes

2023 promises to be an eventful year for the telecommunications sector. Telefónica, Orange, Vodafone, MásMóvil, and Digi are waiting for events that could radically change the map of operators in Spain and Europe.

The big companies have been arguing for a long time that companies must recover profitability in order to continue generating value and increase investments in technology, as in the case of 5G. This means abandoning aggressive pricing policies and consolidating in the market. And everything seems to indicate that both will be achieved next year.

The first of these is a fact. Both Vodafone and Telefónica have announced that they will raise their tariffs in the face of the inflationary scenario. It should also be remembered that the telecommunications sector has been deflationary to date. In other words, while the cost of living for citizens is rising, operators’ services are even negative compared to last year.

And with the increase in tariffs, the large operators will logically obtain more income. According to the study carried out by the telecommunications consulting firm, the companies will obtain a higher ARPU (average revenue per user). Specifically, it is expected to increase by 5%, “breaking the downward trend in recent years”. However, “this announcement has been responded by some operators have been pronounced and advance that they would not execute this increase, we anticipate that the total net effect will revert”.

The end of the price war is not clear. Digi continues to increase its commitment to low prices and is increasing its customer base by stealing from Telefónica, Orange, Vodafone and now MásMóvil. The latter, for its part, is reluctant to abandon the low-cost market and with its low-cost brands has great offers for those customers who do not want premium services in their homes.

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The merger between Orange and MásMóvil will set the course

The second point, as mentioned above, is consolidation. After the “I do” of Orange and MásMóvil, it now remains to be seen whether the highest European competition authority will give permission for the marriage to be announced. Doubts exist within the telecommunications sector, but the two interested parties hope that the ruling will be positive and that the merger will take place, which even Vodafone and Telefónica see with good eyes.

In this regard, the study indicates that “the merger between Orange and MásMóvil will completely revolutionize the sector, but its impact depends on the time it takes for European regulators to reach a decision on the matter. Until this happens, the sector will remain at a standstill; however, the changes will accelerate after the decision, which will probably be associated with the requirement to divest assets under advantageous conditions and will determine who will be the new fourth player in the market and its strategy”.

The report also draws conclusions on the fiber optic market in rural areas. Large companies such as Telefónica have shown an appetite for investment to grow in this segment. Others, such as Avatel, continue to grow enormously and are progressively acquiring local operators to create a giant in the sector. Thus, Nae maintains that “the consolidation of small local fiber operators will continue”, although “the largest operations will wait until this process has been completed”.

It is worth noting in this section that Telefónica closed the entry of partners in its rural fiber business. A few days ago, the operator agreed to sell 45% of its rural fiber business, Bluevia, to a consortium formed by the infrastructure fund Vauban Infrastructure Partners and Crédit Agricole Assurance for 1,021 million euros in cash. The objective is to achieve coverage of more than five million homes passed with this new-generation technology network.

In addition, the study emphasizes the enormous potential of the rural segment for telecommunications companies and predicts that by 2023, the first rural 5G initiatives with public-private collaboration will be seen.

The debate between the telecommunications sector and technology companies

Another important subject for the telecommunications sector is its positioning with technology companies. The president of Telefónica and the GSMA, José María Álvarez-Pallete, has claimed on several occasions that Facebook, Netflix, or HBO should pay for the use of networks as they take advantage of them to offer their content.

In this sense, the report indicated that “the first indications of how the economic contribution of digital service providers, such as Google or Facebook, to the deployment of telecommunications networks, will be arbitrated will appear, where we foresee that none of the parties will be satisfied.”

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(Featured image by Kārlis Dambrāns CC BY 2.0 via Flickr)

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First published in EL NDEPENDIENTE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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