Telefonica offers cheap Spain tariff to stem custom loss

 

Telefonica SA is launching cheaper and simpler customer-friendly tariffs on its home turf Spain in the hope of stemming the increasing flow of clients to rival operators as an economic downturn bites.

The euro zone's largest telecom company by market capitalisation also said on Thursday it hopes to use the economic crisis as an opportunity to boost efficiency.

In September it rejigged its top management team and business structure in the hope of weathering a downturn in which its keystone Spanish unit, responsible for about a third of group revenue, has suffered huge custom losses and has been the focus of investor concern.

That shuffle brought with it a new Spanish unit director, Luis Miguel Gilperez, replacing Guillermo Ansaldo who now heads a global resources unit.

Gilperez said a series of flat tariffs would be offered from Nov. 10 to Spanish customers, including a 5 euro per month discount if they are ADSL customers as well. He declined to forecast the impact on the company's accounts.

"This is not about cutting prices, it's about something much deeper," Gilperez told reporters, referring to what he said was a new focus on individual customer needs.

In the past Telefonica has said its Spanish strategy is to defend "high-end" clients.

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Spanish unemployment of 21.5% has weighed on the competitive climate, and packages of lower tariffs have cut into the traditional premium that clients paid for the former monopoly's services, once widely considered to provide better quality.

So far this year around half a million mobile customers have switched to cheaper rival operators such as France Telecom's Orange and TeliaSonera's Yoigo, numbers which in monthly terms crept up from 60,000 clients in January to 90,000 in August, according to data from telecoms watchdog CMT.

Its ADSL services are also suffering, with market share at 50.36% in August versus 52.7% in December.

Telefonica had said on Wednesday it would slash the range of handsets it sells and centralise costs so as to improve efficiency.

"The situation is complicated ... although we are optimistic by nature. We have to be prepared for when things get better so that we become a more efficient company," Jose Maria Alvarez-Pallete, head of Telefonica Europe, told reporters.

"(We can't) let ourselves fall behind in studying technology, in buying spectrum or in service quality, or in handset strategy ... these are things we have to look at so that when things improve, we are well positioned."

Telefonica's third-quarter results due on Nov. 11 are expected to show pressure on revenue in Spain offset by a strong performance in the group's Latin American units.