Spanish Government to Levy New Tax on Telecom Operators and Private TV Stations

May 12, 2009

Spain is about to approve legislation that will levy a 0.9% tax on telecom operators’ gross revenue as well as a 3% tax on the gross revenue of private TV stations. Because the government plans to terminate advertising on TVE, the Spanish public TV broadcaster, it has decided to compensate TVE for the lost revenue by levying additional taxes on IPTV and other pay-TV operators. This may be a deadly strike for telcos. While IPTV viewership has been steadily increasing, as we discussed in our new Spain country intelligence report, both advertising revenue and IPTV service revenue have been shrinking in the past several months due to the impact of the global economic crisis and will likely see a more moderate annual growth of IPTV revenue in 2009 (see exhibit). The new tax policy will likely add significant burden to Spain’s telecom operators, and the profitability of IPTV service is becoming questionable.

Although taxing telcos to fund the Spanish public broadcaster is a somewhat ambiguous policy that could result in increasing service prices, I believe that it is also possible for Spain’s IPTV providers to compensate for the shrinking profits through increased advertising revenue — as it becomes unavailable on TVE. Recognizing the upcoming opportunity, Telefónica, Spain’s biggest IPTV operator, in April 2009 announced the launch of a new IPTV-based interactive advertising system that will target specific audiences by offering advertisements that match lifestyles and interests.

— Stela Bokun, Analyst

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