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Telefonica prepared to sacrifice Spain ARPU

Telefonica will cut mobile phone tariffs in Spain to maintain its customer base in the recession, eating into average revenue per user (ARPU) if necessary, the firm's head in the country said in an interview.

“We will defend our customer base against the competition,” the head of Telefonica Spain Guillermo Ansaldo was quoted as saying by La Vanguardia.

“Implicitly, we are going to match tariffs to the circumstances, even if we lose a bit of ARPU. In 2009, price will be the main attribute of mobile telephony.”

Ansaldo's remarks come after Dutch operator KPN told Reuters on Friday that sales at its two cheap tariff brands in Spain were picking up as customers looked to cut their phone bills.

KPN's Blau and Simyo offer cheap calls in Spain, renting infrastructure from France Telecom's Orange.

However, the number of Spaniards who systematically shop around operators is tiny, according to Telefonica's Ansaldo.

“There are people who go searching for price and are prepared to change operator as many times as necessary; but they represent little more than 1% of customers,” he said.

Spain's three main operators Telefonica, with its brand Movistar, Vodafone and Orange compete for each other's customers by offering new sign-ups free or low-cost handsets in return for signing contracts of 12-24 months.

Telefonica would subsidize fewer basic handsets in the future, opting to subsidize more sophisticated handsets that encouraged customers to spend more on added services, Ansaldo said.

Orange and Vodafone have said Spain's sharp consumer slowdown is hitting sales, but Telefonica has been slower to recognize any decline.

In a separate report on Monday, Expansion said British regulator Ofcom was considering taking away radio-electric spectrum from Telefonica's O2 unit, and from Vodafone, in order to redistribute it to competitors.

The move, designed to boost competition in the UK market, would cost O2 Ł60 million and Vodafone Ł90 million, said Ofcom. (Reuters)