Western Europe Telecommunications Insight


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Western Europe Telecommunications Insight
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Q112 has seen a flurry of activity in Portugal's LTE market, with the country's three incumbent mobile operators Portugal Telecom (TMN), Vodafone Portugal and Sonaecom (Optimus) rolling out LTE networks in time for the distribution of LTE licences by the telecoms regulator, ANACOM, on March 20 2012. The LTE technology will allow the operators to offer high capacity mobile data services. However, BMI believes Portugal's weak economic outlook and deteriorating political risk profile will reduce consumers' appetite for high-value services, including premium data offerings, in the short to medium term.

In March 2012, mobile market leader TMN announced the launch of its LTE network. The network is currently limited to around 20% of population, but the operator plans to extend coverage to 80% of the population by Q212 and 90% by the end of Q412. Also in March, Optimus revealed its readiness to launch commercial LTE services as soon as it receives final approval from the regulator. TMN and Optimus' announcements follow that of second-ranked Vodafone, which said in January it is ready to launch commercial LTE services in 13 cities after it receives an operating licence from the regulator. BMI notes that all three operators won spectrum in Portugal's LTE spectrum auction in November 2010. They each paid a total of EUR113mn for nine blocks. This is the minimum amount set by ANACOM, which fixed March 20 2012 as the date to issue final licences and approvals for LTE services.

Not Looking Good
Portugal Private Consumption Forecast, 2009-2016

The moves by Portugal's mobile operators will see the country join a growing list of European markets where LTE has been launched commercially including Germany, Sweden and Norway. The take-up of the service in many of these other markets has been muted, mainly because of the unavailability of LTE-compatible handsets. However, the introduction of LTE handsets by Swedish operators TeliaSonera and Tele2, as well as Vodafone Germany in Q112 has improved the prospects for LTE deployments across the region.

Despite this development, we believe that Portugal's dire macroeconomic and political outlook will hinder the growth of LTE services over the next few years. BMI's Country Risk team expects Portugal to experience a prolonged period of negative or stagnant growth. The severe fiscal austerity measures imposed by the country's IMF/EU EUR78bn bailout programme will drag real GDP growth into a second year of negative territory in 2012 to the tune of 3.6%, while a challenging environment in the wider eurozone will further weigh on growth. As a result, BMI forecasts real private consumption to post a second full year of contraction in 2012 with a 3% drop, following a 3.9% drop in 2011. We also expect rising unemployment; public and private sector wage deflation; and a mounting tax burden, required by the bailout programme, to squeeze private consumption and this is forecast to experience negative growth on an annual basis until 2015.

This scenario does not bode well for the take-up of high-end products and services. Vodafone and TMN have revealed tariffs for their LTE service, with the lowest price plan costing EUR49.99 (US$65) a month. Meanwhile, tariffs for LTE-compatible handsets, when they become available, could be significantly higher considering that TeliaSonera and Tele2 are offering voice and data packages of up to SEK649 (US$95.5) a month in Sweden. In view of the slump in private consumption in Portugal, it is difficult to see much enthusiasm for LTE subscriptions in the country. We expect consumers to opt for cheaper alternatives in the short to medium term amid tighter household budgets. That said, the longer-term outlook is promising as a steady increase in internet-based services and, potentially, economic recovery will ultimately drive demand for high capacity data services.

Part of the Pharma & Healthcare Insight series of newsletters, Western Europe Pharma & Healthcare Insight provides informed and independent analysis on the main trends affecting the pharmaceutical and healthcare industries in France, Germany, Greece, Italy, the Netherlands, Norway, Portugal, Spain, Switzerland and the UK.

Western Europe Pharma & Healthcare Insight examines key trends in the market, focusing on individual therapeutic segments and top-line data for prescription drugs, OTCs, generics and the international trade in pharmaceuticals.

Regular features include meaningful commentary on the activities of R&D-based multinationals and indigenous players in the fields of drug development, mergers & acquisitions and foreign investment. Western Europe Pharma & Healthcare Insight also provides analysis of the impact of regulatory changes on industry performance and competitive intelligence on leading pharmaceutical companies in the region.

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