Malta’s telecoms market could face a shake-up and a massive push to expand into next-generation services. While some of the country’s major telcos are seeing changes in their ownership structure, the island’s government announced plans for an additional fibre-optic cable to France to reduce the country’s reliance on its existing links to Italy. These developments could shift the balance of power in Europe’s smallest telecoms market. In addition, the country has forged a partnership with Chinese telecoms giant Huawei who will be testing new mobile technologies on the island that could pave the path to 5G. Investment in fast networks and connections have long been a priority for the country as it has laid the foundation for a range of industries such as financial services and iGaming, which are reliant on strong and resilient international connectivity. As markets around the world are now investing in 1 gigabit networks, Malta’s telecoms sector needs to advance if it wants to continue playing a key role in the country’s economic expansions.
Malta’s economic success could not have been achieved without the support of an advanced communications infrastructure, and the country has always been a frontrunner in telecommunications. As early as the 1850s, the island was connected to Sardinia, Corfu and Sicily by submarine telegraph cables, among the very first of their kind to be laid on the seabed. During the past 20 years, the sector has gone through a period of rapid change brought about by privatisation and de-regulation. Maltacom – later rebranded as GO – was once the sole telecommunications provider on the island, but the liberalisation of the market in the 1990s has provided competition. The country became Vodafone’s first venture outside the UK, making Vodafone Malta both the smallest and the oldest foreign subsidiary within the Vodafone Group.
In subsequent years the sector has attracted further foreign investment from the UAE, the US and the UK. The most recent wave of acquisitions has seen Melita plc being bought by Apax Partners, a French private equity firm that manages funds in excess of €2.4 billion, and Fortino Capital, a Belgian venture capital company. In the spring of 2017, Melita and Vodafone revealed plans to join forces, and the merger is currently awaiting regulatory approval. Under the merger, the current shareholders of Melita will own 51% of the combined company and Vodafone Europe B.V., the current shareholder of Vodafone Malta, will own the remaining 49%. In 2016, telecoms operator GO’s majority shareholder, Dubai’s Emirates International Telecommunications (ETI), sold all its shares to Tunisia’s national telecom company, Tunisie Telecom (TT).
"The local industry has successfully transitioned from a monopolistic, to a liberalised, competitive environment with all the regulatory obligations incumbent on it; has faced, head on, one of the world’s worst financial crises; has had to face some serious commercial decisions and yet, has marched on strongly."
Edward Woods, Chairman of the Malta Communications Authority
A Competitive Market
The telecoms sector is a key driver of Malta’s economic growth. It underpins the success of other sectors since it is a crucial enabler of the knowledge-based economy. On its own, the sector contributes close to 2% to the economy and provides jobs for some 2,000 people. GO, Melita and Vodafone, each capable of offering quadruple or triple play, are the three largest players. Then there are a number of smaller players, including mobile virtual network operators and three companies, Ozone, SiS and Vanilla Telecoms, offering internet and/or fixed telephony services. Malta has also developed a growing cluster of service providers offering hosting and co-location services on the island. Bandwidth is slightly more expensive in Malta than in most other European countries due to the fact that Malta is an island, but increased competition from multiple market players is expected to drive prices further down in the near future.
With 65% of the market share, GO is the dominant operator in the fixed telephony market, followed by Melita with 34% at the end of 2016. In the mobile sector, Vodafone accounts for 44% of the market, followed by GO Mobile with 38% and Melita Mobile with 17%. Other operators, which include mobile services offered by Malta’s Labour Party under the brand Redtouch Fone, and VFC Mobile operated by the capital’s football club, have a small market share. Fixed broadband access is provided by a number of service providers over DSL, FTTH, cable and fixed wireless. Cable technology accounts for the majority of the subscriber base with 47.2%, followed by DSL with 44.2%, FTTH with 5.5% and fixed wireless with 3%. In terms of market share by operator, the fixed broadband internet market is almost equally split between Melita and its cable services (47%) and GO Mobile (50%) which besides DSL also offers FTTH in some localities in Malta.
"Innovation and disruptive technology pose both a challenge and an opportunity for telecoms. On one side it is a challenge to keep up the huge investment that adoption of new technologies bring about as well as their effect of cannibalisation of traditional revenues. On the other hand it is an opportunity as both innovation and new technology have a significant and exponential increase in the demand for telecom services."
Amanda Nelson, Former CEO of Vodafone Malta
Mobile drives Growth
Developments in the Maltese telecoms markets in recent years have been consistent with trends observed in previous years. In 2016, mobile telephony registered notable gains in terms of subscriber numbers and traffic volumes in contrast to falling traffic volumes for fixed telephony, albeit a growing subscriber base. The number of fixed line subscriptions totalled 234,383 at the end of last year, up by 4,157 from 230,226 a year earlier. This shows that the large-scale replacement of landlines with mobiles that has happened in other countries has not been recorded in Malta. Some 90% of Maltese households still have a fixed line. While the Maltese still value their home line, traffic volumes in the second half of 2016 were weaker than recorded during the same period a year earlier. The number of outgoing voice calls was down by 7.4 million (or by 9.9%), which can be attributed to an increase in mobile phone use. The number of mobile subscriptions was up by some 35,340 and reached 592,923 at the end of 2016. This means that Malta’s mobile penetration stood at 135.1%, up from 128.4% a year earlier.
While SMS are on a steady decline in Malta in line with international trends due to the rise of instant messaging services such as WhatsApp and Viber; mobile data navigated on a solid growth path, both in terms of take-up and activity. The number of users actively accessing mobile broadband services totalled 308,829, up from 270,055 at the end of 2015. Meanwhile, the fixed broadband market saw a 5% increase, with the number of subscriptions climbing from 163,205 at the end of 2015 to 171,293 at the end of 2016. At the end of 2016, the number of fixed broadband subscriptions with access to download speeds of 100Mbps more than quadrupled, from 2,270 to 10,561.
The mobile and fixed broadband market offers the greatest growth potential and revenue opportunity for Malta’s telcos. Consumers are increasingly expecting to access information and use services while on the move, and smart cities, smart homes, connected cars, and the like are slowly but surely becoming a reality.
To meet current and future demand from domestic and business consumers, all stakeholders have heavily invested in infrastructure. Today, Malta is one of the few countries where mobile data access can be guaranteed everywhere. International connectivity is provided via five submarine cables. GO has two fibre-optic submarine cables linking the island to Sicily, while Vodafone and Melita have one each. In addition, Melita has teamed up with US-based provider Level 3, one of only six tier-one operators in the world, and a new fibre link connects Malta to Milan. Electricity company Enemalta has installed an additional fibre-optic cable to Sicily as part of the electricity interconnector. Enemalta is using part of this capacity to transmit the data required in the operation of the interconnector, while the remaining fibres are being made available to interested parties for commercial operation in partnership with Enemalta. However, the fact that all links end in Sicily means that traffic has to pass through a number of hops resulting in latency, until it arrives to ‘more connected’ internet points. While this latency has no implications to most internet users, it jeopardises the sustainability and further development of the iGaming, financial and other knowledge and ICT based service industries. To reduce Malta’s reliance on the existing links, Malta’s government plans to invest in a new fibre optic cable to Marseille with the support of EU funds. There is also demand for a second cable connecting Malta and Gozo to ensure connectivity of Malta’s sister island and to attract foreign investment. International link operators in Malta are obliged to cooperate in case of connectivity problems on their own link, thereby ensuring companies that internet access is guaranteed at all times.
Since 2002, the Maltese telecoms market has come under the authority of the Malta Communications Authority (MCA). The MCA grants licences, resolves disputes relating to communications, and monitors the telecoms market and reports to the Ministry for Competitiveness and Digital, Maritime and Services Economy. The Malta Information Technology Agency (MITA) is the prime government agency managing government’s own IT programmes and is also responsible for the promotion of ICT initiatives within the Maltese society. Initiatives aimed at raising the level of technology skills within the population have produced significant results. The is island’s strong educational offering in ICT, as well as in engineering, attracts large numbers of young people into the sector, satisfying its demand for technical consultants, telecoms engineers and network technicians. Malta’s government is committed to taking the successful sector further and is seeking to facilitate the roll-out of next-generation networks (NGNs). Wi-Fi hotspots have also been a priority, and the MCA, in collaboration with other entities, now manages a total of 300 free Wi-Fi spots across Malta and Gozo.
Joining the 1-Gig Club
Given the ever-increasing data volumes being transferred online by companies and consumers, Melita and GO are focusing on upgrading their networks to allow faster internet speeds. The fastest download speed currently on offer is 500 Megabits. However, data volumes, particularly among corporations, are expected to increase further and could feasibly trigger a demand for resilient, direct internet connections. This makes investment in NGNs a priority if operators are to sustain their revenue growth and the country wants to continue hosting those industries that are reliant on fast and reliable international connectivity. There are already a number of places in the world that offer speeds of 1 gigabit per second and that have attracted companies and industries requiring super-fast connections. While some sector experts say ‘gigabit speeds’ are an overkill, unnecessary and not worth the costs, the proponents of this technology believe that having one of the fastest broadband networks gives localities a decisive economic advantage, paving the way for the development of next generation internet applications. While the return on investment would have to be carefully weighted, there is an opportunity to turn Malta into one of the first 1-Gig countries in the world. The island is eyeing infrastructural expansion across all sectors, and policy planners should ensure that Malta has vital links for the future and for the emerging Internet of Things (IoT) market.
A key challenge will be maintaining fair competition in the transition to next generation access. In this respect, the authorities are committed to playing a key part in facilitating the roll-out in whatever way is feasible and ensuring the necessary regulatory clarity in the new environment. In the long term, companies will also need to embrace new revenue streams, through the offering of high value services and machine-to-machine technologies in the fields of billing, security and identity to private and business consumers.
"Malta will shortly become the country with the most powerful telecoms network in Europe. We are currently investing in technology that can provide one gigabit speed over our fixed internet infrastructure, while moving towards 5G in mobile communications. Should the planned merger between Melita and Vodafone Malta be approved, these infrastructure upgrades could be in place by end of 2018 rather than 2020 if they had to be carried out solely by Melita."
Harald Roesch, CEO of Melita
Testbed for New Technologies
With its central location in the Mediterranean acting as a bridge between Europe and North Africa, the island also seeks to establish itself as a preferred base for global network operation centres or cloud-data centres servicing the neighbouring markets. Equally, cloud technologies offer opportunities for growth in the island’s domestic market as the large numbers of small and medium-sized business are expected to be early recipients of cloud based services. Malta’s size, geographic location and population density mean that it is also an ideal location to act as a test-bed for new telecommunication services such as city management and intelligent transport systems. In fact, in early 2017 the MCA published its revised licensing framework for the grant of spectrum rights for test and trial licensing purposes. The country has also signed a memorandum of understanding with Chinese telecoms company Huawei to test new mobile technologies in Malta, as well as to establish an innovation centre in collaboration with the University of Malta for the development of Safe City solutions, including IT applications for alarm reporting, data transmission, video surveillance, transport management, police scheduling, wired-wireless communications and voice and video conferencing technologies.
Advancing in the Gigabit Economy
Around the world, telecoms companies are battling for relevance as they face competition from technology brands such as Apple, Google and Facebook through free text-messaging apps and the like. Growth opportunities for Malta’s telecoms providers will most likely develop in the corporate segment. Efforts to attract more telecoms-reliant businesses to Malta are expected to trigger demand for more resilient bandwidth and might make gigabit deployment a feasible opportunity to ensure economic progress. Cities already offering superfast internet report above-average growth in high-tech jobs, as well as salaries. They say some companies don’t even need high-speed connectivity to help in the development process but are attracted by the talent pool that these gigabit economies have created. In this scenario, the government’s role will be that of an enabler and a facilitator, working with the private sector to drive ICT innovation. Telecoms companies around the world emphasise that a healthy gigabit economy does not only require deployment of technologies, but also pro-investment policies, a thriving ecosystem of suppliers and regulatory frameworks that support strong competition. Advancing in the gigabit economy is not easy, but it is good news for Malta that the multiplier effect may be stronger than expected – and may justify the investment.