The Liberalisation of the Portuguese Telecommunications Market
Luis F. L. Bernardo, Portugal
The Portuguese telecommunications market has improved under the deregulation and liberalisation process established and boosted within the European Union. Until competition began to arise with the authorisation of the second mobile telephony operator (Telecel) in 1992, Portugal Telecom (PT) ran the market in a monopolistic way. Now PT is almost totally privatised and on January of 2000, the market will be fully liberalised. However, except for the mobile telephony, Portugal Telecom still dominates the Portuguese Telecommunication markets today. The main effect of the liberalisation has been the reduction of prices to the consumer and the improvement of the service quality. The international service prices reduced 67% (on average) in result of the liberalisation of the direct international interconnection on the beginning of 1999 and the strong concurrency from the mobile telephony operators. PT international service provider (Marconi) is presently restructuring to adapt to the new market conditions and to optimise the profit potential of its deployed infrastructure of submarine cables to Africa and America and satellite links. A similar effect is expected on the market of Fixed Telephone Service with the start of a new provider (E3G) on the beginning of 2000, especially for major clients. PT is internationalising its operation is response to the market pressures. Alone or associated with the Spanish Telefonica, it is investing in the telecommunication markets of Latin America, Africa and East Europe.
The total Portuguese telecommunication market's revenue reached 3,6 thousand millions Euro in 1998 and is expected to grow 40% during the next five years. The total investment on the period 1994/1998 reached 3,6 thousand millions Euro and are expected to increase to 4,3 thousand million Euros on the period 1999/2003 focused on fixed telephony (60%) and mobile telephony service (29%). These two services represent 90% of the market's revenue, but are expected to decrease its importance with
the development of cable TV and the Internet market.
The mobile telephony service has grown exponentially since its introduction, in 1991. During 1998 the number of subscribers increased 85 % and the mobile phone companies increased their revenue by more than 125%. A new operator (Optimus) raised 335 thousand subscribers after 4 months of operation. Today three operators share the digital mobile telephony market (GSM 900 and GSM 1800 networks) with a total of 3,07 million users, which represents more than 30% of the population. The market shares were respectively 45.5% for the PT subsidiary (TMN), 43.7% for Telecel and 10.8% for Optimus. The analogic mobile network is used by only 1900 subscribers, and will possibly be disconnected in the future. The number of pager service subscribers is decreasing since 1997, and on December 1998 it had 264 thousand subscribers. The fixed telephone network presently has 4,1 million lines, but this number is also decreasing since 1997. The number of mobile telephony service subscribers is expected to exceed those from the fixed network during the year of 1999. Clients are adopting the mobile telephony service as the main voice service.
More than 80% of the mobile telephony service clients are subscribers of the prepaid service. The prepaid service was introduced word-wide in the Portuguese market on September 1995 by the PT subsidiary (TMN). Today, all three operators have a variety of prepaid packages, with different time costs and pay periods. The availability of a widespread unified banking network that supports service payments has allowed the introduction of other prepaid services, including Internet service subscription and toll tele-payment. For instance, the BRISA's toll tele-payment system is the most successful one in Europe, with 650 thousand subscribers on a total of 4 million cars (16%).
The fixed telephone service is starting to change its main market, from the voice to the data and multimedia. The new fixed phone operator E3G is formed by the electrical and gas distribution companies, and will use most of its already installed telecommunication infrastructures covering the entire country (including SDH optical-fibber networks). It plans to invest 500 million Euros during the next eight years. Besides the voice market, it already has participation on one of the mobile telephony operators and plans to also play on the Internet and cable Tv markets.
The cable Tv and the Internet will be important markets in the future. They are presently dominated by PT subsidiaries, and shared with small companies with low investment capacity. Though, with the liberalisation of the interconnection network, major companies with strong investment capacity and infrastructures deployed are preparing to also enter on these markets. The ISDN market is also expected to continue to grow. Today PT has 314 thousand ISDN subscribers.
At the end of 1998, PT dominated 95% of the cable Tv market, which had 596 thousand subscribers (14%) and the infrastructure covers 44% of the houses. The cable network is used mainly as a broadcast media, with the exception of low bandwidth Internet services (64Kbps) introduced recently. The introduction of high bandwidth cable modems (xDSL) and digital television promise to turn the cable Tv operators on a major player on the local access loop, competing directly with the fixed network operators.
The PT Internet Service Provider (Telepac) dominated 75% of the Internet market at the end of 1998. There were 144 thousand individual subscribers (less than 3% of the houses) and 28 thousand corporate subscribers, and 10 thousand hosts registered (excluding the university and research network). This market has double its size every 10 months, and is expected to have the biggest development on the next years.
A complementary academic network for research and development (RCCN) is financed and managed by government funding. RCCN connects the universities, libraries, research institutes, and the all the secondary schools (more than 2000 entities). The network has 22 PoPs distributed through all the country. It is connected to the European research network Ten-34/155 using a 10 Mbps link and is connected to the other Internet hosts using a 6 Mbps link.