Portugal - financial credits for NGN investments

Portuguese Government Approves 800-mil.-Euro Credit Line for NGNs

Portugal's operators are set to invest one billion euro (US$1.36 billion) in next-generation networks (NGNs) in 2009, as the government announces 800-million-euro worth of credit.

Significance - The government has stated that it sees the development of NGNs as an urgent matter, as they will support employment and the boost the competitiveness of the Portuguese economy.

Implications - Although the terms of the credit line have not been disclosed, they are likely to be highly favourable to the operators, and represent a timely cash injection. As the global economic crisis bites, operator spending is reined in and private investment sources dry up.

Outlook - The Portuguese government had set a goal of 50% home broadband penetration by 2010, and this latest investment should allow the operators to significantly surpass this target.

Portugal's government has announced an 800-million-euro credit line for the roll-out of next-generation broadband networks in the country. Prime Minister Jose Socrates announced the funding, saying he hoped the country's main telecoms operators would invest one billion euro to build NGNs during 2009. The credit line forms part of an agreement between the government and the operators Portugal Telecom, Zon Multimedia, Sonaecom, and ONI on the roll-out of fibre networks, and is the first step in a 2.18-billion-euro plan announced in December 2008 to boost the country's economy. Prime Minister Socrates said the credit line would pave the way for improvements in high-speed internet, television and voice services, adding: "This is the launch of the first measure of the stimulus plan to combat the economic crisis."

Outlook and Implications

Development Through Fibre: Portugal's PM said he hoped the investment would allow up to 1.5 million homes and businesses to be connected to the new fibre networks. He added that the government has no preference regarding how the networks are rolled out by the operators, leaving them to reach a decision among themselves on whether single or multiple networks are constructed. Although the terms of the credit line have not been disclosed, they are likely to be highly favourable to the operators, and may represent a timely cash injection—as the global economic crisis bites, operator spending in reined in and private investment sources dry up. Portugal's broadband market has showed strong growth, not least due to widespread cable and DSL networks. ADSL2+ services are also available from alternative operators such as Vodafone and cable data speeds at up to 100mbps were trialled in 2007. The Portuguese government had set a goal of 50% home broadband penetration by 2010, and this latest investment should allow the operators to significantly surpass this target.

A Timely Economic Boost: The credit line forms part of a government recovery plan, which hopes to kick-start the Portuguese economy, which, according to the Bank of Portugal, went into recession at the end of last year and is expected to shrink 0.8% during 2009. The government has stated it sees the development of NGNs as an urgent matter, as it will support employment and the boost the competitiveness of the Portuguese economy. The country's wireless sector continues to show healthy growth, and the injection of this amount of cash into the fixed-line industry can only be a good thing for Portugal's telecoms industry.

A Further Lift for Portugal Telecom: The Portuguese telecoms regulator Anacom has recently shown willingness to ease regulation on Portugal Telecom (PT), with the lifting of pricing restrictions on the former incumbent's broadband services, a move which is largely seen as an effort to encourage further investment from PT in NGN roll-out. Stagnant growth in the company's home markets and a rising burden of debt have been offset by strong revenue growth at its Brazilian unit Vivo and its Africatel investment, and the stimulus of PT's home broadband market means that this investment is likely to stand the company in good stead in weathering the continuing economic storm.

Vodafone Conspicuous by Absence: U.K.-based operator Vodafone has not been listed in the companies participating in the agreement, raising some eyebrows given its ambitious plans for expansion into Portugal's fixed-line sector. However, Public Works Minister Mario Lino has stated that Vodafone did not participate, having requested more time to conduct further market studies, but may do so in the future—leaving the gate open for the operator to join the party at a later date.