Faced with escalating costs of increasingly sophisticated smartphones, some European operators have been looking at alternative financing options that would relieve the cost burden of subsidies yet continue to make smartphones affordable for end users.
Approaches such as device-financing plans have therefore been on the rise, and "the death of subsidies" is seen by some as a distinct future outcome of such moves--particularly in markets such as Spain where both Vodafone Spain and Telefonica's Movistar abandoned smartphone subsidies this year in order to cut costs.
Nevertheless, Orange Spain has said it plans to continue with the subsidy approach and says this will help it grab market share from its two rivals, according to a report in Bloomberg.
"There's no need to end subsidies," Jean Marc Vignolles, chief executive officer of Orange Spain, said in an interview with Bloomberg. "I have not personally seen any evidence that our two competitors have benefited from such a radical move. They've suffered commercially."
Indeed, Vodafone Spain has already announced plans to reinstate smartphone subsidies after losing more than 600,000 customers in the second quarter, according to a report earlier this month from Reuters.
Some analysts believe subsidies are the right approach in a market mired in the worst economic crisis in decades.
"Other operators including Orange are grabbing market share," Alexander Wisch, an analyst at S&P Capital IQ Equity Research in London, told Bloomberg. "Telefonica is aware of that but its priority is to conserve cash. I don't think this is sustainable in the long term, but in the short term it is definitely good in terms of cash conservation."
Telefonica is focusing on bundled packages of services that combine elements such voice, broadband and pay-TV, such as the recently launched Movistar Fusion bundles. Vodafone Spain has also been taking a similar approach with its own service bundles.
Orange Spain also told Bloomberg it is interested in acquisitions that could boost its market share, and is "participating" in the sale process of Yoigo, the Spanish unit of TeliaSonera. While TeliaSonera is in no rush to sell Yoigo, Orange Spain said it would also not buy the company "at any price."
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