Telefonica, Vodafone hit hard as Spanish customers cancel contracts

Spanish mobile operators lost 254,000 customers in May, with Vodafone and Telefonica experiencing the sharpest downturn after both firms cut smartphone subsidies.

According to local telecom regulator CMT, this overall decline in mobile subscribers does indicate a slowdown from the 380,000 that cancelled their contracts in April. However, Telefonica took the most punishment in May with more than 200,000 of its customers deciding not to renew their mobile contracts with the operator, according to Reuters.

The damaged inflicted on Vodafone and Telefonica, which control almost 70 per cent market share between them, is attributed to their decisions to cut smartphone subsidies in an effort a trial a new business model that could be deployed elsewhere.

"The savings achieved in 2012 from cutting handset subsidies for new customers to Telefonica (potentially up to around €500 million) are likely to be re-invested given Orange did not follow Telefonica and Vodafone's lead," Goldman Sachs telecoms analysts said in a recent note to clients reported by Reuters.

Of note, Orange Spain gained nearly 23,000 new mobile connections in May, benefiting from its decision to continue subsidising handsets for customers.

The CMT added: "Reduced activity was also noticeable in switches from one provider to another, with 329,200 changes recorded in May, a considerably lower figure than the half a million switches registered at the end of 2011."

A bright spot in this gloom remains broadband connections which saw 32,000 new lines being added in May, with Telefonica registering its second month of gains in this area, according to Reuters.

For more:
- see this Reuters article

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