Lost in roaming revenues telcos compensate with more massive consumption

Since this summer, the rates that customers pay for a call, for browsing or for connecting to Internet is the same outside and inside their country

The European Union put an end last June 15 to roaming – the hated extra cost, charged by telecommunications operators to their customers for calls, messages and, above all, the data connection they made in other country. There is no additional cost for travel in Europe for users.

Telecommunications companies do continue to pay each other when their customers use another operator’s network during the trip, but the EU has drastically reduced the maximum price they can set for this wholesale service.

READ MORE: EU mobile data ‘quadruples’ since roaming charges banned in June

Faced with this new scenario, the Spanish big telcos feared the worst. The position of Spain as a global power of tourism, as a major recipient of international tourists, made the Spanish operators the biggest losers of the end of roaming, as they would serve millions of foreign tourists but at prices much lower than those in previous years.

However, during this summer the Spanish subsidiaries of the big telcos have seen how they have overcome the impact of the end of the charge for roaming thanks to the greater number of international tourists arriving in Spain and because the consumption of mobile data has skyrocketed in this first summer without roaming. Companies charge less to each customer, but there are many more customers and they use their phone a lot more.

The large telcos have noted the exorbitant increase in data consumption this summer. Orange already announced a couple of months ago that the data traffic of foreign travelers in its Spanish network shot up about 400% during the summer. And Telefónica and Vodafone confirm that the consumption of data from foreign customers has more than tripled since the end of roaming.

And this increased consumption is what has made the blow has been compensated.

“European tourists who come to Spain benefit from the fact that interconnection is cheaper, which causes our revenues to fall. But they are many more customers and spend much more, “explains Vodafone Spain CEO Antonio Coimbra. “In the end, the effect on our accounts is practically neutral”, given that the payments for Spanish clients traveling abroad are also lower now.

Orange, the Spanish subsidiary of the French group confirms that its retail expenses (payments for the use of networks of its customers in another European country) have fallen, and wholesale revenues (which it charges other European telcos for giving up their network to tourists who come to Spain) have been triggered by the strong increase in the use of mobile internet data.

For its part, Telefónica has estimated the negative net impact of the end of roaming on its accounts for the third quarter of the year at 70 million euros. But for the group’s CEO, Angel Vilá, that effect on both income and gross operating profit (EBITDA) has been positive in the case of Spain and negative for its subsidiaries in Germany and the United Kingdom.

Millions invested in networks
Telefónica, Vodafone, Orange and MásMóvil have been forced to strengthen their networks to withstand the expected increase in traffic, especially in the most tourist areas. Orange has invested so far this year 35 million euros to expand the capacity in its network stations (21.4 million were allocated specifically to locations of special tourist influx).

The rest of the operators have not disclosed the amount of the investments made to guarantee the good functioning of their connections, but all confirm that they have had to make an additional effort. “‘In order to face the end of roaming, investments have been made in specific tourist areas and due to the greater use in summer,” says Coimbra, from Vodafone. “But they are investments in very small networks compared to the total investment we have been running to support the strong increase in data consumption of our customers in general.” 

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