Telefónica Spain struggles with churn as market share drops

Telefónica continues to struggle in its domestic market, having lost 36,320 mobile subscribers in January, which pushed its market share below 40 per cent. The company, which according to data from the Spanish Telecoms Market Commission gained customers in December, is being hurt as consumers look for better deals driven by the ongoing economic problems in Spain.

According to Reuters, smaller operators, including TeliaSonera's Yoigo brand, are attracting subscribers while Telefónica is working hard to reduce churn. A marketing push last November helped the company stem losses in December, but overall the operator has lost 1.7 percentage points of market share in the last 12 months.

Telefónica now has 39.89 per cent of the Spanish market, down from 40.07 per cent in December, but remains comfortably ahead of Vodafone's January 28.25 per cent and Orange's 20.08 per cent.

Commenting on the company's efforts, Deutsche Bank analysts wrote in a reseach note said that the downward trend in its mobile business reflected Telefónica's structural issues domestically. "We expect domestic EBITDA to fall a further 11 per cent in 2012 as Telefónica will have to face either the operational leverage of the revenue declines or the costs of fixing the share loss," the note said, according to Reuters.

Last week, Jose Maria Alvarez-Pallete, chairman and CEO of Telefónica Europe, told Reuters that, despite the tough economic backdrop, the group was not looking to dispose of any of its operations in Europe in order to cut its debt. "The message we are giving to all of our teams is that there is light at the end of tunnel," he said, adding: "We are very committed to Europe, so we are not restraining capex in Europe, we are investing very heavily because we are betting for the future."

Of note, Alvarez-Pallete said that the company's German subsidiary was the highlight in Europe and was gaining market share. He also denied rumours that the operatiors is looking to sell its mobile operations in Ireland in an effort to reduce its €57 billion debt burden.

For more:
- see this Reuters article
- see this separate Reuters article

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