Telefónica goes quad-play to win back mobile line losses
Top executive manager of Telefónica España, Miguel Gilpérez, announced the launch of a series of integrated service plans on 1st October. Commercialised under the Movistar Fusión brand, the new plans bundle combinations of landline, fixed-broadband (ADSL or Fibre), pay TV and mobile service plans and offer these for jaw-dropping discounted prices.
Telefónica’s aim is clear: win back the scores of mobile subscribers it lost since it abolished the subsidies model in March 2012. Based on telecom regulator, CMT’s, data, Movistar’s mobile customer base shrank by 1.1 million between March and June 2012. A large share of departing customers joined Orange which is still offering subsidies to all clients. With Vodafone reintroducing handset subsidies for all new clients that joined between 1 August and 15 September 2012 as part of a summer offer, Telefónica needed to either take a step back from its subsidies strategy or offer strong incentives to customers to join its network despite the absence of subsidies.
The structure of the service plans is rather simple:
- There is a fixed-broadband connectivity plan included in all four options. The service is delivered either over ADSL with a maximum download speed of 10Mbps (two options) or over FTTH with a maximum download speed of 100Mbps (other two options). The price difference between ADSL and FTTH stands at €10 per month.
- The other differentiating factor has to do with the integration, or not, of pay TV services. Imagenio Familiar is present in two of four options and provides access to more than 70 channels and the full football offering of the League and the Champions League for the entire season. The cost of adding the pay TV service to the bundle stands at €30 per month.
- There is a mobile service plan included in all four options that offers 500 minutes to all national destinations, unlimited SMS and 1GB of data. The bundle can expand to include additional mobile service plans with the same characteristics as those described above for a monthly fee of €20 per additional plan.
- There is a landline calling plan included in all four options that offers unlimited calls to national geographic numbers, 500 minutes to mobile numbers during the weekend and 50 minutes to mobile numbers on weekdays.
- The fixed-line rental is included in all four options.
- The announcement stipulates a 12-month commitment period.
- Various add-ons are available to configure the package such as additional mobile lines, multi-SIM, or a handset financing or upgrade scheme.
Without doubt, the four options provide simplicity, transparency and no surprises to the subscriber. This is particularly important now that the Spanish consumer is feeling the pain of declining disposable income as a result of the government’s fiscal consolidation measures, a beyond-belief unemployment rate of 25% and the insecurity of what tomorrow may bring.
To alleviate this pain, Telefónica offers considerable discounts ranging between 30% and 50% over the total price of the bundle’s components if these were to be taken independently. This is a step further in the price war that is currently ravaging Spain’s fixed and mobile businesses and which is maintained by all market players. In particular, the mobile service plan fee of €20 per month is only a fraction of the €50 monthly fee “Habla y Navega 50” subscribers pay for 500 minutes to all national destinations, unlimited SMS and 500MB of data.
When looking at the full spectrum of speeds offered by Telefónica’s fixed-broadband service plans, what strikes is the exclusion of the recently-launched VDSL 30Mbps plan from Movistar Fusión options. Telefónica knows well that its VDSL plan constitutes a credible alternative to its fibre offers at a small premium of €5 over the €24.90 monthly fee of its 10Mbps package; it will sell well and its inclusion in the Movistar Fusión mix would jeopardise Telefónica’s efforts to promote fibre in Spain’s recession-hit market.
Local media have reported that a 12-month commitment period will apply. Therefore, clients who upgrade from a mobile service plan to a Movistar Fusión plan will need to enter a new contract period thus extending their stay with Telefónica.
Telefónica informed that the offer was communicated to CMT and awaits for approval. In the meantime, Orange claims that Telefónica’s offer cannot be replicated by competitors and urged CMT to ban Movistar Fusión before its commercial launch on 1st October. Orange has experienced first hand the unprecedented success of quad-play bundles in its home market and has good reasons to believe that the same model will also be successful in the neighbouring Spanish market. In August 2010, Orange France launched Orange Open, a suite of five quad-play service packages bundling fixed broadband and telephony access with pay TV and mobile calling. In November 2011, Orange open surpassed the 1-million users mark while in June 2012 it had already surpassed the 2-million users mark (2.1 million customers at 30 June 2012).