BMI's forecasts for Ireland's fixed-line voice, broadband and mobile communications markets have been revised downwards yet again, as operators have been unable to mitigate falling subscriptions across the board. We expect Ireland's telecoms market to continue struggling in 2013 and 2014, although Hutchison 3 Ireland's acquisition of Telefonica's O2 Ireland may have some unpredictable effects on mobile market dynamics. Over the long term, we expect a looming price war between mobile operators and the expansion of fibre and mobile broadband networks to rural areas to bring about renewed growth, pushing 3G and 4G penetration and stabilising ARPUs by 2017.
- At the end of June 2013 there were 5,438,144 mobile subscriptions in Ireland, including mobile broadband and M2M subscriptions. Total mobile subscriptions have decreased by 0.3% this quarter and decreased by 0.9% in the year to Q213. Mobile broadband subscriptions declined by 3.4% this quarter.
- Based on the underperformance of Ireland's mobile operators in H113 we expect market wide ARPUs to drop to EUR28.07 by the end of 2013, and below EUR28 in 2014, but forecast they will recover slightly over the long term, as increased 3G and 4G penetration rises towards the end of our forecast period to 2017.
Key Trends & Developments
Spanish telecoms operator Telefonica confirmed it will sell its Irish unit O2 for EUR850mn (US$1.1bn) to Hong Kong-based Hutchison Whampoa's Irish subsidiary, 3 Ireland. Of the total, EUR780mn (US $1.02bn) will be paid in cash on completion of the transaction, while a further additional deferred payment of EUR70mn (US$91.7mn) will be linked to the achievement of agreed financial objectives. The deal, when granted regulatory and anti-trust approvals, will propel 3 Ireland into second position in the Irish mobile market, with an estimated combined share of 38.8% and just over 2mn subscribers, based on operator data for Q213.
The acquisition of O2 Ireland by Hutchison-owned 3 Ireland is likely to result in a significant number of O2 subscribers churning away from the enlarged entity, as the introduction of newly rebranded and repriced plans could lead to consumer dissatisfaction or, at the very least, pique latent interest in offerings from rivals Meteor and Vodafone. We certainly expect Vodafone, at least, to respond to the changed market environment with aggressively discounted offers in the latter part of 2013 and early 2014. This expectation has already been confirmed, as 3 Ireland stated its intention to challenge its rivals to an all-out price war in July 2013.
As the acquisition is still pending, the results of the merger on Ireland's market dynamics are not reflected in this quarter's report. However, we will follow the development of the merger closely, and will include our analysis of its impact on the mobile market in subsequent reports.