Large telecommunications companies are reaching agreements to create fiber marketing companies, a type of firm called ‘fibrecos’ or ‘netcos’ in the sector, with which they seek to improve their accounts after strong investments in recent years in the deployment of this network.
Telefónica and Vodafone Spain announced last Thursday that they are going to create a fiber marketing company with which they hope to cover 3.6 million real estate units and, as they explain, will allow both parties to maximize the use of the current FTTH (fiber optic to the home) network.
In this company, Telefónica Spain will have 63% of the capital and Vodafone Spain 37%.
It is not the only case, last July MasOrange and Vodafone Spain signed an agreement in principle to create a national fiber society with which they hope to give coverage to 11.5 million installations in Spain and in which they intend to incorporate a third investor in the capital.
These moves come at a time where fiber deployment covers a large part of the national territorywhich has meant that, in recent years, operators have made heavy investments in this field.
In fact, Spain is one of the leaders in fiber coverage in Europereaching 92% in general coverage and 80% if only rural areas are analyzed, according to the latest report prepared by the neutral fiber operator Onivia and the Indra consulting firm, Nae.
In parallel to these large deployments and the increase in Internet use, in recent years a change has been generated in the panorama of the telecommunications sector with the entry of large international platforms external to the traditional businessbut they increase competition in some areas of this.
The arrival of messaging platforms, such as WhatsApp, or large content platforms, such as Netflix, has increased competition for traditional telecommunications companies with digital giants that develop their business based on these networks, but without investing in their deployment.
Why ‘fibrecos’ are created
In this context, when traditional operators segregate fiber assets, these new companies are created open to third parties that can use those infrastructures. “more efficiently”as Augusto Baena, partner in the Telecommunications Media and Technology industry at the consulting firm Oliver Wyman in Iberia, explains to EFE.
This allows increase available supply in the market without the need to duplicate networks that would overlap each other and also facilitates the entry of investors who can contribute capital.
“It allows operators to take an asset off their balance sheet to monetize it and focus on selling services to the customer. Furthermore, in pending deployments in rural areas, a financial investor contributes to the financing of networks that, due to their low density, are more expensive to deploy,” adds Baena.
For his part, Joaquín Guerrero, general director of the consulting firm Nae, explains that many of these operations have a clear financial component.
“This is an opportunity to refinance or reduce debt by monetizing an asset which, otherwise, remains ‘buried’ in the operator’s balance sheet. But beyond that, in the industry the functional separation between infrastructure and services and clients is beginning to be valued as a good practice,” he points out.
In this aspect, Guerrero considers that it is different businesses with different cyclessince, while the infrastructure is planned for many decades, everything related to customers is done by quarters.
Future scenario
The experts consulted consider that the movements can continue as it is a dynamic sector and that some may even be seen. consolidation movements among smaller operators.
“We believe that functional separation scenarios, such as those allowed by fibrecos, are going to be more and more frequent in the coming months. And we also think that they are going to play an important role in the consolidation strategies that the FTTH sector faces in Spain,” says Guerrero.
The expert points out that there are more than 300 operators selling this type of services, many of which have some type of their own network.
“It is reasonable to think that, in the medium term, Spain will tend towards a limited number of large networks which, most likely, will be articulated as fibreco,” he adds.
“We think that the movement will continue in the coming years with the segregation of more networks towards fiber operatorsthe negotiation of wholesale infrastructure sharing agreements between operators and the consolidation of some of these networks among themselves to improve economies of scale,” says Baena.
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