The Spanish operators have been racing to claim the first spot in the LTE market, and Vodafone narrowly grabbed the crown, launching commercial services in seven cities on May 29. Orange will follow suit on July 8 and TeliaSonera’s Yoigo unit on July 18.
The only cellco which has not tried to join in the jostling for first place is incumbent Telefonica, which has reportedly only just issued its tender and so is unlikely to go live until late this year. It may be biding its time until it can harness the 800MHz spectrum it bought in the LTE auction in mid-2011. The three largest cellcos all acquired licences (2x10MHz apiece) in the band, which is valuable for cost effective wide coverage, but the digital dividend frequencies will not be ready for mobile use until next year.
As in some other countries, like Germany, the fourth player missed out on the prized 800MHz spectrum ,which means Yoigo must center its coverage strategy on its 1.8GHz holdings. In 2011, this was seen as a big disadvantage for the smallest cellco, but that difference is narrowing ‘ though 1.8GHz is less good for indoor penetration than sub-1GHz bands, its balance between coverage and capacity is propelling it center stage in the global LTE map, as seen when Apple chose to support it in the European iPhone 5, but not 2.6GHz or 800MHz.
Yoigo bought 1.8GHz licences in May 2011, when the Spanish regulator auctioned spare frequencies in the GSM bands as additional LTE spectrum. Orange bought 900MHz assets in the same sale but Telefonica and Vodafone were barred from competing.
Unlike the other players, Telefonica indicates that its 1.8GHz GSM spectrum is at full capacity, with none available for LTE refarming yet, though the regulator has granted it the option to refarm 900MHz (it bought an extra 2x5MHz in this band in 2011). Spain is pushing this lower GSM band more aggressively than most regulators for LTE, rather than just 3G expansion, though it is not yet developing mass adoption or device ecosystem like 1.8GHz.
In the 2011 auction, the big three also took home the lion’s share of the 2.6GHz spectrum on offer, winning 2x20MHz each, while the remaining 2x10MHz was allocated in a regional basis to various players, and the TDD frequencies went unsold.
Vodafone will initially offer LTE in Barcelona, Bilbao, Madrid, Malaga, Palma de Mallorca, Sevilla and Valencia, running its network in the 1.8GHz and 2.6GHz bands. It aims to achieve population coverage of 55% in the launch cities at the start, rising to 85% by the end of the summer, with 60% in-building coverage, using about 1,000 LTE base stations of different sizes. It is supporting the latest LTE technology, which supports peak download speeds of 150Mbps (though there are no European devices available yet).
Vodafone has said that, when it goes live with LTE in the UK later this year, it will charge a premium for the new service, which it also hopes to tie into the launch of a new iPhone and other flagship devices. In Spain, it is adopting a common approach among European operators, to offer LTE speeds to high end users at no extra charge but to increase the monthly fee for those on standard smartphone contracts (by €9 a month). However, the upgrade will be free to everyone until September 30.
While Yoigo is clearly the poor relation in spectrum terms, in the short term Telefonica seems in the most difficult position in the depressed and highly competitive Spanish mobile market and the two may well huddle together for warmth with a 4G roaming deal. Delaying its LTE launch until at least October is an another challenge to add to Telefonica’s squeezed ARPUs and market share. The past week has seen it slashing the prices of its high end smartphones, such as the Galaxy S4, by up to 30% to try to halt customer defections.
However, it insists it will not return to offering subsidies, a policy it boldly abandoned a year ago. At the time, Vodafone also said it would move away from subsidies, which make a big dent in carrier profits, but it has since partially turned back on its word, faced with subscriber losses. Regulator CMT says that Telefonica’s Movistar mobile unit lost a net total of 700,000 customers in the first quarter of this year and in the year to March 31 it lost three percentage points of market share, falling to 35.6%. However, the incentive to drop subsidies was clearly seen in the cellco’s Q1 margin, which had leapt to 47%, from 42.6% in the year-ago quarter.