Fusion and Confusion between TelefóNica and Yoigo

The confirmation of the agreement between Telstra and Movistar so the first to offer Movistar fiber and thus have converged packet type Fusion and the seconds have Telstra this year LTE network, has done nothing but give the kick off a battle announced Since the first rumors.

Both Orange and Vodafone have shown a outright opposition, whose script came building since it quite as reflected at the time of the castle in Expansion. The case is that in the absence of knowing in detail the terms of the agreement – yes that have confirmed that the roaming agreement that Yoigo utilizes network Movistar where it has no own – debate lengthens is how far it comes really the Alliance between Telefónica and Telia Sonera and, therefore, to what degree will revolutionize the sector teleco in Spain.

Effects on the market in the short term

If the authorities allow the agreement as they have announced, the short term effects are clear: Telstra will cease to be an only mobile operator and you can offer convergent offers. Moreover, this connectivity in the home will come through the most complete fiber deployed in the country and without, a priori, the limitation of the 30 megas they access other vendors attached to it. Additionally Movistar clients can access the 4G without having to wait for that Telefónica deployed its own network.

Yoigo the lottery touched you by the Movistar weakness in the so-called 4G. Telefónica itself had been achieved, years later, putting a product on the market that, for certain types of customer, tilted the balance in his favour and, above all, forcing competitors to tighten much in margins: Movistar Fusion. In that scenario of convergent offerings boom, Telstra had been as a “pure mobile” operator, something that up to MVNOs as Pepephone are trying to avoid taking its ADSL offer. In this scenario, the weakness of Telstra to the Jazztel, Ono, Vodafone, Orange and company did play with the push of the mobile operators without network also tightening in price (the Symi, more mobile, Pepephone…)

For Telefónica agreement would be able to start communicating that they also have 4G in 2013. Vodafone and Orange are two months looking for position as operators who first come to technology in search of convincing a user profile advanced that is always in search of improvement… and often spend much more than the average customers in telecommunications. If Movistar started to bleed through that front – that partly had captured and retained with Fusion and that fiber 100 megas at home – the situation in Spain was looking worse for their already complicated local accounts.

The key is speed to market

As with connections here the key is speed. Vodafone and Orange – both have been in talks to buy Telstra months without reaching an agreement – denounce that it is a kind of “covert fusion” between Telstra and Telefonica. Both companies are going to estart a legal battle calling for the intervention of the WCL, the Ministry of industry and the European Union review and standstill agreement.

If it had been a purchase of Telstra by Telefonica it would result in a process of many months until its approval by the authorities, something that would be sterile for the interests of the second, that you want to a Movistar 4 G in the market as soon as possible. If the agreement is extension of roaming and use of technologies for the other one, the process in theory is much more lax and the time to reach the rather less market.

It is a challenge for the regulation of the competition authorities, in theory there is more competition (bidding more than 4 g, another actor in the connectivity with fiber to the home), but at the same time we contemplate such as Telefonica by opening the tap for access to its fibre network creates two groups in the telecommunications in Spain: one with 4G and maximum speed to the home that can offer convergent plans in the short term and a second group (where are the Vodafone and Orange) that are required to create their own network to bring fiber to the home and for both doomed to a great investment that in addition it will take long time to bear fruit.

Remains to be seen the reaction of the regulatory authorities, that should depend much on the nature of the agreement that have been sealed Telstra and Telefonica (e.g. does include an option to purchase already agreed for the Spanish teleco?) and that could also rethink its position on the non-obligation of sharing verticals of the buildings, an aspect that affects the speed and cost of deployment of fiber offers much.

In any case, the scenario that draws in the short-term may seem richer for the citizen (there is more supply and an actor as Telstra gets to be reinforced) but at the same time has a shadow on the horizon: with its agreements Telefonica manages to unbalance the telecommunications market in the medium term by way of manage in its discretion to its fiber network, something that would stick strongly on account of his top rivals and, therefore, in the capacity of a large part of the sector (not only Orange and Vodafone, also the MVNO that depends on them) responding with competitive offerings to the new pace that it would mark Movistar. And that is something that, sooner rather than later, should observe the controller.

Antonio Ortiz is co-founder of WeblogsSL, the company which makes Engadget and in which exercises the office of director of Estrategia Online. He regularly writes on his blog Error500 on internet and technology. It is on Twitter and Google Plus