Coronavirus competition curb hits Iliad in Italy, but helps at home

• Number portability down by as much as 63% under lockdown
• Challenger MNOs losing momentum, according to analysts
• Incumbents are 'double winners' as portability stalls
• Spain tweaks fixed and mobile portability regs

Lockdown in Western Europe is proving detrimental to competition in the telecoms space, hampering smaller players' ability to challenge the dominance of their larger rivals.

We all saw it coming.

When Spain moved to suspend number portability a month ago, just prior to lockdown, in a bid to help with social distancing and reduce pressure on telco customer service channels, it seemed clear that market minnow Masmovil would be the one to suffer most. The operator, which has proved an aggressive disruptor, in the M&A market as well as in pricing terms, outstripped the big three in number portability terms last year. Further, it was reportedly the only one of Spain's big fixed and mobile operators to oppose a voluntary suspension of portability, before the state stepped in.

Spanish regulator the CNMC has yet to publish any number portability data for 2020, so we'll have to wait a little longer to see exactly the impact on Masmovil. But new statistics from neighbouring markets indicate that it is indeed the challengers that are suffering from the current state of stasis in telecoms competition.

In a report shared by various news outlets this week, equity research firm Jefferies has drawn two early conclusions from analysis of mobile churn data in countries under lockdown: Operators are benefiting from the lower rate of churn in terms of reduced commercial cash costs, which could help them stick to free cash flow outlooks; and challenger operators are losing market share growth momentum, in that they are no longer poaching as many customers from their bigger rivals.

"Clearly, the challengers will benefit from lower commercial costs as well, but the incumbent operators are the 'double winners' (lower cost, less share loss)," Jefferies analysts wrote.

France's Iliad provides an interesting case in point.

The operator has commanded many column inches since it launched services in Italy almost exactly two years ago and began aggressively eating into the incumbents' market shares. It had racked up a share of 6.6%, excluding M2M, as of the end of last year, according to Agcom. The regulator's statistics show that Iliad's 3.2 percentage point market share gain over the previous 12 months came at the expense of market leader Wind Tre in particular, which shed 2.8 points of share, while TIM and Vodafone also lost ground.

The slower pace of mobile number portability during lockdown – in Italy porting was down by 59% in the 16 March-19 April period, according to Jefferies – is reversing that trend.

"The notable beneficiary [of the portability reduction] appears to be Wind Tre, and to an extent also Telecom Italia and Vodafone, unsurprisingly at the expense of new entrant Iliad. We note the effect seemed to have somewhat of a run-up into the lockdown, but the trend changes further strengthened post-lockdown," the analysts concluded.

The pattern was similar in France, where portability between 3 March and 19 April fell by 63%. However, although Iliad's Free Mobile remains the market's smallest player, a renewed customer acquisition focus from Bouygues Telecom and Altice-owned SFR puts them in more of a challenger position. As such, Orange and Free Mobile are benefiting from reduced porting, since they had been losing customers to their rivals, while Bouygues and SFR had been achieving positive net ports; All are now moving to a neutral position, Jefferies' figures show.

Lack of porting data on the Spanish market means it is not covered by the Jefferies report, but it is logical to assume the pattern there will mirror Italy and France.

Spain's total ban on portability lasted until early April, when the CNMC introduced new rules to allow a limited amount of customer movement. In a nutshell, mobile operators are permitted to carry out number portability requests at 25% of their normal level, while fixed operators may port 50 numbers per day.

The impact of those limits will be visible when the regulator next produces market statistics, but it's safe to assume that the big three mobile operators are currently gaining some breathing room from Masmovil's various brands' price promotions and customer loyalty schemes.

And in the broader industry, data gleaned during lockdown and from the impact of the Covid-19 pandemic will keep analysts busy for years to come.

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