2010 Portugal - Telecoms, IP Networks, Digital Media and Forecasts

Portugal’s ASO in early 2012 paves way for sub-GHz mobile broadband

BuddeComm’s annual publication, Portugal - Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in Portugal.

Portugal has a mid-sized telecom market, with one of the highest contributions to gross domestic product in the European Union, though this fell from 5.1% in 2003 to 4.7% in 2007 before climbing to 4.8% in 2009. The country is among those in Europe most affected by the global financial crisis.

By late 2010 the government’s deficit had reached €15.7 billion, while government debt was some €127.9 billion and debt as a percentage of GDP reached above 76%, far above the EU’s recommended maximum of 60% of GDP.

These figures have made it difficult for the government to guarantee its pledges to commit public funds to telecom infrastructure upgrades, and so during the next few years such upgrades, particularly in the fibre sector, may have to lean more heavily on the cash-strapped private sector. This could delay network rollout, and leave rural areas with a poorer service.

Broadband penetration is below the EU average while mobile penetration is among the highest in Europe. The incumbent, Portugal Telecom, has seen its share of the voice and DSL markets fall during the last few years as pressure from competitors mounts, though it remains the dominant player by a considerable margin.

Portugal Telecom is also the leading operator in the mobile sector. Its subsidiary cable TV (CATV) division, PT Multimédia (PTM) was sold in 2007 following the failed takeover bid from the Sonae Group earlier in the year. Renamed as ZON Multimédia in early 2008, the operator controls about 70% of the CATV market.

In the broadband market, new entrants have been able to launch competitive offers based on LLU, which has grown considerably since 2005. As the direct result of competition through regulatory intervention on LLU, end-prices for consumers have fallen significantly in recent years while data speeds have increased substantially: in late 2009 ZON introduced Europe’s first 1Gb/s FttH service.

Several operators are investing in fibre and upgrading cable networks, and by mid-2010 more than three million households had access to high-speed broadband services. In addition, some important measures have been taken regarding the legal framework for deploying Next Generation Access (NGA) networks, including in-building infrastructure, access obligations to public utilities’ infrastructure, reinforced rights of way and the promotion of public and private investment. The provision of a broadband universal service obligation (USO), pending for several years, was reviewed by the government during 2010.

Investment in the telecom sector has slumped since the high of 2007, when operators addressed upgrades to fixed-networks with EuroDOCSIS3.0 and fibre technologies while MNOs concentrated on software upgrades to provide data services based on HSPA+ and LTE. The economic crisis, which saw investment falter, continues to provide a break to telcos’ commitments and no respite is anticipated for the next two to three years.

Similarly, sector revenue, which reached €7.7 billion in 2008, has been affected by ongoing economic conditions and may fall to about €7.1 billion in 2011. The knock-on effects for telcos as a result of regulated tariffs concerned with MTRs, voice and data roaming and wholesale access charges, compounded by consumer reluctance to spend on other than essential services, will further inhibit their ability to upgrade networks. In addition, the government, itself strapped for cash, has been pressed by the EC to curtail its expenditure, and so avoid the bail-outs thus far found necessary for Greece and Ireland.

Key telecom parameters – 2009; 2011

(Source: BuddeComm)

Market highlights:

• ADSL is the principal broadband access technology, representing 54% of all fixed-line accesses in mid-2010, while cable accounts for 41% of broadband subscribers. Further competition has arisen from players not normally associated with broadband, among them Vodafone which by mid-2010 had about a quarter of the overall telecoms market by revenue.
• The triopoly of MNOs offer their own low-cost brands to tap into the important no-frills sector. Despite the regulator having studied the competition effect which low-cost operations have the market since 2005, the MVNO model has been slow to develop, with only two serious players – the postal company Correios de Portugal (CTT), which markets its services through 1,000 post offices across the country, and ZON Multimédia.
• Data revenue as a proportion of total mobile revenue continues to grow at 2%-4% per year following a number of promotional efforts by MNOs to increase use of data services. The proportion of non-SMS related data services is also increasing. Mobile data traffic increased from about 5TB in 2005 to an estimated 28TB in 2010. Continued growth, resting on the back of anticipated LTE networks from 2011 or 2012, may push traffic to about 50TB by 2012.
• Portugal has emerged as one of the few countries in Europe to develop an effective nationwide strategy for deploying fibre, involving the cooperation of multiple operators, the government, and public subsidies. ZON, PT and Sonaecom are the principal operators. The number of broadband connections based on FttX grew 44% in the second quarter of 2010 (quarter-on-quarter). By mid-2010 fibre represented about 4% of all broadband connections, and attracted 53% of new subscriptions. By 2012 fibre may account for 10%-15% of all broadband connections, and the expense of the DSL sector.
• The regulator’s final decision on ASO will see the process completed in three phases during the first four months of 2012. Released spectrum has yet to be allocated, but is likely to be used for mobile broadband services, in common with developments elsewhere in Europe.

This report is essential reading for those needing high-level strategic information and objective analysis on the telecom sector in Portugal. It provides further information on:

• Market liberalisation and regulatory issues;
• The impact of the global economic crisis;
• Telecoms operators – privatisation, acquisitions, new licences;
• Mobile data market developments in coming years in light of spectrum auctions and new licence awards in 2010;
• 3G developments, regulatory issues and technologies including HSPA and LTE;
• Broadband migration to an FttH architecture;
• Historical and current subscriber statistics and forecasts;
• ARPU statistics and forecasts.

Data in this report is the latest available at the time of preparation and may not be for the current year.