The year 2024 will be historic for Telefónica. It is its centenary, but it is also when it will lose for the first time the category of company with the largest number of customers in Spain, if Brussels approves the merger between Orange and MásMóvil.
Its president, José María Álvarez Pallete, has been demanding for years to free itself from the obligations to which Telefónica is subject as a former monopoly and dominant operator in the sector. But it has been since the announcement of the merger that it has redoubled its public and hidden pressure to advance in this field given the change in market conditions it entails. It remains to be seen if he will achieve it before the shareholding earthquake he is experiencing ends and the Spanish state through SEPI and the Saudi state with STC sit on his board of directors.
For now, what is clear is that the European Electronic Communications Code regulates the procedure for defining markets and identifying under what conditions national regulatory authorities can impose specific obligations on operators identified as having significant market power. Telefónica, as a former monopoly and the largest company in the country, is the one that has accumulated all these obligations in Spain for years. Among them is the transfer of its copper and fiber networks, giving access to other operators in the homes where it provided service at some point, both in voice and broadband. Also give way to wholesalers in their networks and in their centers to place their equipment and provide universal service and guarantee connection to all users at affordable prices in any location.
The closure of the copper network in the first quarter of 2024 is a liberation, for obvious reasons. In the case of the fiber network, the argument used is that the rest of the operators already have sufficient deployment to guarantee competition. Although there are different interpretations. “In the regulation of indirect fiber access, Telefónica will continue to be the only national operator with a network in the majority of areas in which the National Markets and Competition Commission (CNMC) considers that the alternatives for the consumer are not sufficient. This would justify maintaining the regulation of regulated indirect service for Telefónica. The expansion of rural operators would, on the other hand, push for deregulation,” says Javier Arenzana, partner responsible for Telecommunications at KPMG in Spain.
Telefónica is already close to achieving its first victory. This past week, the CNMC closed the public consultation to review conditions in the submarine cable routes that connect the Iberian Peninsula with the Canary Islands in which it recognized that “the appearance of new alternative submarine cables to those of Telefónica represents a very notable increase of competition in this wholesale market.” If there are no changes in six months, it will free Telefónica from transferring these infrastructures.
“The company wants to advance along this line of deregulation. In due course, the CNMC will analyze the obligations imposed on Telefónica in 2021 and they will foreseeably be subject to modification. With a different market structure, it is necessary to analyze the obligations from another point of view. But from there, it is impossible to predict what the CNMC will do,” warns Clara Alcaraz, partner in the Regulatory, Administrative and Competition department at KPMG Abogados, who is confident that “this review will begin in the first half of next year.”
