BMI's Executive Summary

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By the end of September 2007, there were 49.054mn mobile subscribers in the Spanish mobile market, with the sector having grown by just 4.3% in the first nine months of 2007. Based on expectations of reasonably strong growth in the fourth quarter, BMI estimates that there were 50.046mn in the market at the end of the year; this is equivalent to a mobile penetration rate of 113.9%. Despite the extremely high mobile penetration rate, we believe that penetration will continue to edge upwards, with 56mn mobile subscribers at the end of 2012, helping to push up penetration to 124.5%. Meanwhile, we have revised our forecast figures for growth of Spain's 3G market. We believe that out of the total number of 3G 'devices' reported by Vodafone, and the mobile broadband customers reported by Orange, only a fraction of these are actually 3G subscribers. We estimate that there were 3.819mn 3G customers at the end of 2007, which is equivalent to 7.6% of total mobile users, and which is a significantly lower number than we had previously predicted. We predict that more than 11% of mobile users will be using 3G services by the end of 2008, and that this proportion will increase to almost 27% of the market by the end of 2012.

In October 2007, it was reported that Europe's biggest mobile-phone company, Vodafone, had acquired the Spanish and Italian operations of Swedish operator Tele2, for EUR775mn. In Spain, the deal gives Vodafone access to Tele2 Spain's broadband subscriber base, which was reportedly 203,635 at the end of June 2007, making it Spain's fifth-largest broadband provider. Spain's broadband market appears to have grown by 24% in 2007, and we predict a further 19.7% increase in broadband subscribers in 2008. By the end of 2012, we predict that there will be over 16.4mn broadband customers, which will be equivalent to 36.4% penetration. In September 2007, Clearwire Espana became the latest company to enter Spain's broadband market with the launch of a WiMAX offering in Seville.

Also in October 2007, it was confirmed that Spanish Telefónica and a group of Italian financial heavyweights had completed their long-awaited EUR4.1bn (US$5.8bn) takeover of Italian incumbent Telecom Italia, The acquisition of a 23.6%-controlling stake in Telecom Italia by Telco, a holding company comprising Telefónica and four major Italian financial investors, was expected to bring to an end a period of limbo which has affected the Italian incumbent. In a filing to the Spanish market regulator, Telefónica has said it will pay EUR2.3mn (US$3.29mn) for a 42.3% stake in Telco. This will give Telefónica 10% of the share capital, with voting rights in Telecom Italia.

Spain currently sits in fifth place in our Business Environment Rankings for Western Europe, behind Italy but ahead of the smaller markets of Greece, Belgium and Switzerland. Although Spain's position in our rankings table benefits from the strength of its regulatory independence, and competitive environment, it is let down by a weak country structure score and a relatively low score for potential telecoms market returns.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - Business Environment

West European Markets

Spain

Table: Western Europe Business Environment Ranking

Chapter 3 - Industry Forecast Scenario

Fixed-Line

Table: Spain Telecoms Sector – Fixed-line – Historical Data & Forecasts

Internet

Table: Spain Telecoms Sector – Internet - Historical Data & Forecasts

Mobile

Table: Spain Telecoms Sector – Mobile – Historical Data & Forecasts

Key Risks To BMI Forecast Scenario

Chapter 4 - Macroeconomic Forecast

Table: Spain - Macroeconomic Forecasts

Chapter 5 - Country Snapshot: Spain Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Chapter 6 - Competitive Landscape

Market Structure

Table – Key Players: Spain Telecoms Sector

Table: Selected Operators Financial Indicators

Fixed-Line Overview

Table: Regional Fixed-Line Penetration Overview

Internet Overview

Table: Regional Broadband Penetration Overview

Mobile Overview

Table: Regional Mobile Penetration Overview

Market Data Analysis

Fixed-Line

Broadband

Table: Spanish Broadband Market, Q306

Mobile

Table: Spanish Mobile Market Q306

Table: Spanish Mobile Net Additions, Q306

Table: Spanish 3G User Base, Q306

Table: Spanish Mobile ARPU 2005-2006 (EUR)

Table - Spanish Mobile Data ARPU, 2005-2006

Industry Developments

Chapter 7 - Company Monitor

Regional Case Study: Nokia

Table: Key European Contracts

Selected Profiles – Operators

Telefónica

Chapter 8 - BMI Forecast Modelling

How we generate our industry forecasts

Telecommunications Industry

Sources

Competitive Landscape for Europe Telecommunications Reports: Sample of Companies Ranked

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Commentary on key operators highlighting ownership structures, latest available revenue figures, market share analysis and ARPU counts. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company SWOTS Covering all leading telecommunications operators and manufacturers operating in each market, including competitive intelligence on geographic presence and competitive positioning against local companies; local market share; leading products, services and technologies; foreign direct investments, projects, merger and acquisition strategies.

Network of European Telecommunications Sources

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BMI's European Telecommunications Reports are based on an extensive network of multilateral organisations, government departments, telecommunications industry associations, chambers of commerce and company reports. Information sources include:.