Spain - economic downturn

Telecoms Spending in Spain Hit

CMT, the Spanish regulator, has reported its numbers for the first quarter of 2008. Given Vodafone’s well-documented problems in Spain in the second quarter, these are interesting. Total telecoms revenues were up 1.3% on a year-on-year (y/y) basis, which represented a major slowdown from previous quarters. Retail telecoms revenues grew 2.1%, down on previous quarters, while wholesale telecoms revenues slipped into negative growth of 2.6%. The largest retail segment, mobile, reported a small decline in revenues in the first quarter, while the second largest retail segment, fixed-line voice, reported a y/y decline.

Significance: The Spanish economy is slowing down, but in the first quarter this was not particularly discernable in the fixed-line voice segment, where the total number of lines grew between December 2007 and March 2008. In the mobile segment, new registrations and monthly contracts and SMS experienced a decline in revenues in the first quarter, although this is not uncommon given that the fourth quarter is boosted by Christmas. We expect to see a further weakening of the telecoms sector shown in the second-quarter figures as a result of both economic weakness, particularly within the construction sector, but also intense competition.