Telefonica says domestic fourth quarter 2012 margins among best ever

MADRID Wed Feb 13, 2013 4:08pm GMT

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MADRID Feb 13 (Reuters) - Telefonica said on Wednesday that margins in its Spanish business in the final quarter of last year were among its best ever thanks to a new bundled offer that stabilised customer losses and to suspending smartphone subsidies in March.

"The last quarter was one of the best in our history in terms of commercial activity and also in terms of better margins," Luis Miguel Gilperez, president of Telefonica Spain, told reporters.

The company is facing an uphill battle in its home market, where a prolonged recession and a 26 percent unemployment rate have crushed consumer confidence. Telefonica's domestic revenues fell by 13 percent in the first nine months of 2012.

The group reports results on Feb. 28 and investors want to see whether it has managed to stem the decline in its increasingly competitive home market, where it shed over 3 million mobile customers in 2012.

Gilperez said the October launch of Telefonica's "Fusion" package offering combined Internet, television, mobile and fixed lines services, had improved customer loyalty, helped take 600,000 mobile contracts from competitors and boosted its broadband market share.

He said 1.5 million people had already signed up for the new offer by the end of January, with nearly 15,000 people subscribing to the offer daily.

"In order to improve investors' perception of the company, it is crucial to moderate the deterioration suffered in the domestic market," Madrid-based broker Ahorro Corporacion said in a note to clients on Wednesday.

According to data from Spain's telecoms regulator, while Telefonica's share of the mobile market shrank to 36.5 percent from 40 percent over 2012, broadband figures have improved since the launch of Fusion, with Telefonica attracting 42,780 new customers in December.

"For the first time in many quarters we have gone back to being the leaders in capturing new broadband business," Gilperez said. Telefonica attracted 125,000 new broadband customers in the fourth quarter and has 48.3 percent share of the market.

The former monopoly halted subsidies on smartphones in March and was followed by Vodafone, which then reversed the decision after heavy customer losses. Telefonica says it will not go back on the decision, which has helped margins.

Mobile customers defected to Orange, which still offered smartphone subsidies, and cheaper virtual mobile operators, which rent network space from established players. Virtual operators' share of the market grew to 8.92 percent at the end of 2012 from 6.33 percent a year earlier.

Vodafone's third quarter results last week showed the challenges facing operators in Spain. The company reported an 11 percent drop in service - phone calls, messages and data - revenue and has said it will lay off staff in Spain.

Gilperez also said Telefonica would intensify its efforts to roll out fibre optic Internet, which offers faster speeds, to reach 8 million Spanish households by 2015.

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