The Mobile Virtual Network Operators (MVNOs) entered Spain in 2006. The initial desire was to "shake up" the market and capture share with aggressive price offers. They had initial success, with companies such as Jazztel capturing around 7% market share. Indeed, 2013 was the year of the MVNOs, when they gained almost 1.7 million mobile lines via portability. However, three years later the MVNOs had lost a lot of strength and seemed to no longer have the ability to bring prices down and capture large chunks of customers. Critical Markets analyses the growth and the decline of MVNOs in Spain and forecasts the trend for 2017.

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Insight
CRITICAL MARKETS
Europe: The ascension and fall of MVNOs in Spain
February 2017

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© Critical Markets 2017. All Rights Reserved
Europe: The ascension and fall of MVNOs in Spain
By Andre Nascimento
Research Manager
The Ascension
The Mobile Virtual Network Operators (MVNOs) entered Spain
in 2006, as Carrefour Movil (belonged to the supermarket
chain Carrefour) became the first in the market. The initial
desire was to "shake up" the market and capture share with
aggressive price offers. They had initial success, with
companies such as Jazztel capturing around 7% market
share.
Meanwhile, the number of mobile lines in Spain reached a peak in 2011 but then fell abruptly, due to
the ongoing economic crisis at that time. Since then, there was a slow but steady recovery. However,
the share of customers using portability increased and a large share of these dissatisfied customers
choose to move to a MVNO. Indeed, 2013 was the year of the MVNOs. At that time, the MVNOs
gained almost 1.7 million mobile lines via portability, while Vodafone and Movistar were the biggest
losers, with almost 2 million lines lost, according to Spanish National Commission on Markets and
Competition (CNMC). Graph 1 shows the percentage of customers changing mobile operators via
portability (keeping their numbers), compared to the total number of lines in Spain.
Source: CNMC
The Fall
However, three years later the MVNOs had lost
a lot of strength and seemed to no longer have
the ability to bring prices down and capture
large chunks of customers. The popularisation
of apps meant that voice revenues had
reduced considerably and this was precisely one of the key advantages or selling points MVNOs had
used to attract new customers from the big operators.
6%
8%
10%
12%
14%
16%
44
46
48
50
52
54
06 07 08 09 10 11 12 13 14 15
Total number of mobile lines (million) Portability (% of total)
Graph 1 - Portability in Spain (as % of total mobile lines)
" In 2013, MVNOs gained almost
1.7 million mobile lines via
portability, while Vodafone and
Movistar were the biggest losers,
with almost 2 million lines lost."
"Until November 2016, MVNOs managed to
attract just 80,000 lines via portability, compared
to 4580,000 in the same period of 2015, or to 1.5
million between January and October of 2013."

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That situation had been evident throughout 2016. Portability, which had been considered to be of
considerable assistance for MVNOs has faltered and the majority who still port, remain with the large
operators. According to the latest data available that covers the period until November 2016, MVNOs
managed to attract just over 180,000 lines via portability, compared to almost 4580,000 in the same
period of last year, or compared to the 1.5 million between January and October of 2013, at their
peak. The disappearance of the MVNO's Jazztel and ONO impacted on the overall bad performance,
since they were virtual companies that were gaining more lines with portability.
Moreover, the traditional operators had recovered some
ground in the period 2013-2016. After some difficult
years, Vodafone and Movistar improved their numbers
considerably, although they were still in the red. In fact,
with 11 months of data, 2016 was already the best year
since 2008 for Vodafone and since 2010 for Movistar. Graph 2 shows the net (the new clients minus
the ones who left for another operator) number of clients for the largest Spanish mobile operators
All in all, the trend of MVNOs being unable to acquire customers from traditional networks, which was
clearly seen in 2015, had accentuated in 2016. In fact, there were no massive movements in
customers changing operators last year, as MVNOs gained only about 20,000 lines per month.
Critical Markets expects this number to be even lower in December, due to an aggressive marketing
campaign by Movistar, which had improved its retention rates and reduced the number of new
customers migrating to the MVNOs.
Source: CNMC
Another important factor, which helped to explain the downward trend for the MVNOs, is the
saturation of the market. Penetration of mobile numbers in Spain is already very high, as graph 3
highlights. Since 2006, it surpassed 100% (means that there are more mobile numbers than
Spaniards) in the country and continued to grow, albeit at a slower pace, to range at around 110%. At
these levels, it is almost impossible to grow the customer base organically, i.e. capturing new clients.
Hence, the importance for the MVNOs of attracting customers from other operators.
-1,500,000
-1,000,000
-500,000
0
500,000
1,000,000
1,500,000
2,000,000
07 08 09 10 11 12 13 14 15 Jan-Nov
16
Graph 2 - Net number of clients per Mobile Operator in Spain
Movistar Vodafone Orange Yoigo MVNOs
" 2016 was the best year since 2008 for
Vodafone and since 2010 for Movistar."

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Source: CNMC
The trend is likely to continue in 2017
On top of increasing competition, traditional operators
have moved to acquire the MVNOs, thus reducing
competition and improving their reach in niche markets,
where the MVNOs have expertise. In fact, MasMóvil,
which was the MVNO which attracted more customers in
2016. was acquired by Yoigo in October 2016. If we remove MasMovil, all the other MVNOs put
together are likely to have attracted only around 100,000 customers in 2016.
Critical Markets expects this trend to continue in 2017, with the MVNOs losing share to the traditional
network operators. Hence, we at Critical Markets estimates a similar figure of MVNO's growing by just
around 100,000 new lines in the whole of 2017.
For more information about Critical Markets 'Insights' and research capabilities, please contact us on
info@criticalmarkets.com or visit www.criticalmarkets.com
60%
70%
80%
90%
100%
110%
120%
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Graph 3 - Penetration of Mobile lines in Spain
Mobile lines/100 persons (%)
" Critical Markets estimates MVNO to
grow by just around 100,000 new lines
in the whole of 2017."

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