A decade ago, Spain began an expansive cycle of connectivity expansion. While according to the 2013 European Union coverage report it barely reached the EU average in any parameter of analysis, the European Union’s Digital Economy and Society Index (DESI) for 2023 reflects a leadership in the development of telecommunications networks that has been pointed out in the last two years (3rd position in 2021 and 2022). 

Spain is well above the EU average in very high-capacity fixed network coverage (VHCN) (93% vs. 73%), coming close to meeting the Digital Decade target of 100% coverage ahead of schedule. Spain’s strength in fixed networks is underpinned by fibre-to-the-premises (FTTP) coverage (91% vs. 56%). It should be noted that infrastructures are not only almost ubiquitous in the national territory, but they are also being used more intensively by the population than in other member states, with Spain leading the EU in fixed broadband take-up of at least 100 Mbps (87%).

Spain’s mobile broadband performance as reflected by DESI 2023 is not as outstanding, although it is also above the EU average. However, it should not be ignored that mobile broadband take-up seems to be stagnating and that 5G coverage is only slightly above the EU average (82% vs. 81%), still far from the Digital Decade target. 

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The expansionary cycle of telecommunications in Spain has been supported by the public sector, where in the last ten years there has been continuity in the policy of boosting the extension of connectivity despite political changes. A flexible model was defined to support broadband deployment in rural areas, which has evolved as the EU state aid framework has changed and has been able to absorb an increasing amount of funding, €621 million between 2013 and 2021 under the name Plan de Extensión de Banda Ancha (PEBA) and €650 million between 2021 and 2023 under the name UNICO-Banda Ancha within the Recovery Plan.

But the centre of this expansionary cycle has been the private sector with high competition in infrastructures. In Spain, 3 of the 4 large European operators (Telefónica, Orange, and Vodafone) competed, with a regulatory environment favourable to investment that started with the 2014 Spanish Telecommunications Law, with broad political consensus and adopted as good practice in the European Electronic Communications Code. This highly competitive scenario has led to the fact that, according to data from the National Commission for Markets and Competition (CNMC), between 2013 and 2022, more than €50 billion will have been invested by telecommunications operators as a whole. Taking only the investments between 2016 and 2021 and considering the data published by the European Telecommunications Network Operators’ Association (ETNO) regarding the capital expenditures of its partners in that period, Spain could have absorbed approximately 15% of the investments of the large European operators, higher than the 10% of the population of the Union that it represents.

This week it has become clearer that we are witnessing the end of the telecoms cycle. Three major turbulences have converged in the private sector, breaking the market model established in 2013. 



On the one hand, the Orange-MasMovil merger, which will push the incumbent operator, Telefónica, into second place in terms of the number of fixed broadband and mobile telephony customers. A merger that may also favour the strengthening of a new fourth operator, Digi, supported by the market repairs that the European Commission may impose to approve the merger, possibly in the form of 5G infrastructures and frequencies.

The second disruption in the Spanish telecommunications market is the withdrawal of Vodafone. The British company is withdrawing from the national market with the sale of 100% to Zegona, which will be able to continue using the red operator’s brand for 10 years. Although it is difficult to guess the strategy of the new management team, it is likely to be a model focused on low-cost, similar to that followed until now by MasMovil, considering that the purchase by Zegona will turn the new Vodafone into a purely national operator with less investment muscle and that it had already been progressively expelled from the higher-cost market since its renunciation of broadcasting football in 2018.

Finally, the announcement of the entry of the Saudi operator STC in Telefónica seems to have triggered the return of the state to the shareholding of what is still the incumbent operator. SEPI’s exploration of a possible shareholding seeks to reinforce the national presence by limiting the ambitions of the Arab operator, 64% owned by its government, and guaranteeing in the medium term at least the existence of a flag carrier.

In conclusion, if the three current operations are completed, a Spanish telecommunications market will be formed, with two-on-two competition, Telefónica vs Orange in the high-cost segment and Vodafone vs Digi in the low-cost segment, at the expense of the review of the alliances between the four and the actions of other competitors. On the other hand, in the reconfiguration of the European market which is also underway, the political leaders of the future government will have to defend positions that allow for the development of the new Spanish market model at the service of the general interest and, also, to replace public support for the rural deployment of fibre with the promotion of 5G technology. These are the ingredients for a new cycle of success for telecommunications in Spain.