Freezing telephony prices creates new giants in the sector

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Huge business groups,

.

The telecommunications sector is concentrating and revaluing (even against the current of general stock market declines), although this strength contrasts with its manifest weakness in raising prices and therefore income, not even with runaway inflation that is infecting all economic activity.

"

," summarizes Beatriz Montalvo, CEO of Ysi, in a conversation with EL MUNDO.

According to data from this comparator, during the month of June, in which year-on-year inflation reached 10.2%, the following rate changes were recorded: 47 improvements in characteristics compared to 16 reductions in conditions, and 24 reductions in price against 25 raises.

In other words, the market is balanced, as if beyond the telephone there was no worrying increase in the cost of living.

In fact, in the breakdown of the CPI data provided by the INE, it can be seen how the prices of food and beverages varied in June by 12.9%, those of housing by 19%, those of transport by 19.2% and communications... -0.3%.

A recent report by Moody's points out that

, with the example of the main operators in both markets, TIM and Telefónica.

In the latest results of the Spanish company, a rate hike in Latin America was admitted (63% year-on-year in Argentina, 7% in Chile, 4% in Colombia) but far from it was stated that such commercial policy would be extrapolated to Spain.

“There was a moment, in 1997 with the telecommunications liberalization law in Spain, when the model of legal monopolies was left behind and the goal of lowering the entry barriers for other companies so that they could compete with the historical monopolist was set. , such as British Telecom [BT] in the United Kingdom, France Télécom in France [currently Orange] or Telefónica, and that happens by being able to use the infrastructure of the operator that was already there, at advantageous prices established by a regulator.

That made sense until around 2010, but has extended to today.

Regulators have been focusing on two things for a long time: that there is a growing number of operators, with the market increasingly fragmented and giving some operators an advantage over others, and that prices are falling, which leads to a deflationary trend.

», exposes to EL MUNDO Juan Montero, director of Public Policies, Competition and Regulation of Telefónica.

According to Ysi data, in June there were 84 active operators in Spain, many of them virtual, a new generation of competitors that uses third-party networks, including those that were able to use Telefónica's original network.

Among those who lowered rates that month are

and

, two companies that on Saturday announced the definitive agreement for the merger of their businesses in this country.

Although this approval was expected for the second quarter, already passed, the new goal was to complete the operation before the holidays, as has already happened.

This

50% owned -although Orange would have the right to take control in the event of an IPO- is finally valued at 18,600 million euros, 7,800 million euros corresponding to the business of Orange Spain and 10,900 million to that of MásMóvil, including a debt of the latter of about 6,500 million.

With the required financing (6,600 million of bank debt dependent on a pool of financial entities), the bulky liabilities of MásMóvil and the lighter one of Orange, the new company will initially have a debt of over 13,000 million euros.

The "most dynamic" market

This month, at a conference organized by DigitalEs, the CEO of Orange Spain,

, assured that "competition in the Spanish market, which is the most dynamic in Europe, will be further strengthened through the creation of the joint venture", words that suggest that there would be no price increase despite the fact that Spain goes from having four large operators (Telefónica, Orange, Vodafone and MásMóvil) to only three, although dozens of medium-sized rivals swarm around them, small and tiny.

"The excessive fragmentation of the European market, being especially intense in the Spanish market, can compromise competitiveness," argued that manager with a view to the operation "being endorsed by the authorities" as it is "beneficial for the future of Spain and Europe ».

The last word will be from Brussels, since the joint turnover exceeds 5,000 million and affects several countries.

The former president of the CNMC, José María Marín Quemada, considered in 2019 "

" that there were four big ones.

His successor since 2020, Cani Fernández, has been careful not to be so explicit.

When Orange bought

between 2014 and 2015, it was forced to sell part of its assets, which were precisely acquired by MásMóvil.

The yellow company, then residual, has become the fourth operator, has bought the fifth (

) and is in the process of joining the second (Orange) to become the first in terms of customers, with 40% of mobile lines and fixed broadband.

Although it is not advertised, European competition policy has changed, even more so in telecommunications, given the huge number of operators that have nothing to do with the US or China, markets in which only three large ones stand out per country.

Given the North American and Asian strength -especially technological-,

, even more so in the midst of the protectionism that derives from the Russian war and the new misgivings towards China.

Decline since 2000

The market capitalization of European telecommunications is estimated at around 300,000 million, according to a study by Bain & Company in May, which is 75% less than in 2000. "This decline is due to

high returns from products such as SMS,

and international traffic.

Recent regulations and new technologies, such as the appearance of call and text apps, have eroded profit paths, ”says Bain, who points to tools such as WhatsApp (Meta) or Teams (Microsoft).

Sources from the European Commission, asked about this by this newspaper, recall that "

" per nation, and that Brussels takes into account "the reasoning that greater consolidation among operators would facilitate investment", although they observe that "the highest levels of investment occur in competitive markets and the evidence shows that it is this competition and consumer demand, rather than consolidation, that drive investment in the sector."

Between 2015 and 2021, the Commission reviewed 32 telecommunications operations, according to data collected by this newspaper.

A total of 18 were approved without restrictions, 12 were authorized with conditions and

: the merger of TeliaSonera and Telenor in Denmark, on the one hand, and the sale of Telefónica's O2 to Hutchison in the United Kingdom, on the other.

Against Orange and MásMóvil, he plays that these brakes were applied in processes to go from four to three mobile operators;

in favor, that both operations are already more than six years old.

Since then, Europe has been faced with the Chinese economic expansion, Donald Trump's tariffs, Brexit, the pandemic, inflation, war and the consequent sanctions.

Everything has changed, although calling is still cheap if not free.

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