Telefonica cuts TV prices in Spain in fight to retain customers

MADRID Wed Dec 19, 2012 6:20am EST

MADRID Dec 19 (Reuters) - Telefonica has cut prices for its pay-television services and included them in a bundled package in its latest effort to hold onto a sliding customer base in a increasingly competitive environment.

Former monopoly Telefonica said on Wednesday it had lowered prices for its "Imagenio" pay-TV services and launched an entertainment package, featuring TV series and films, for 12 euros ($16) a month.

At the end of September, Telefonica had 760,000 pay-TV accesses in Spain, a fall of 6 percent year-on-year and said the business had been hit by the government's decision to hike value added tax hike to 21 percent from 8 percent on Sept. 1.

Telefonica, Spain's no. 2 player in the television market, launched a television, Internet, fixed line and mobile bundle on Oct. 1 to attract cash-strapped consumers shopping around for the best deal in the second recession in three years.

Consumer confidence has plummeted in Spain, where retail sales have fallen for more than two years straight. The unemployment rate stands at one in four, with the economy not expected to grow again until late 2013.

The company gained 35,470 new broadband customers in the first month of the bundled package offer, Fusion, according to data from Spain's telecoms regulator, the CMT, though it continued to lose mobile clients.

A price war between mobile operators has heated up in recent months in Spain, after the biggest players Telefonica and Vodafone lost customers to rivals after scrapping smartphone subsidies.

Vodafone went back on that decision in November but Telefonica hopes Fusion will offset losses from ending subsidies.

France Telecom's Orange has fought back with a similar package offering television, internet, fixed line and mobile. Smaller player Jazztel also provides bundled Internet and television packages.

Telefonica, which hopes to reduce its debt to 50 billion euros by the end of 2012 from 56 billion euros at end-Sept, has said it is considering listing its Latin American businesses to raise cash.

The company transferred about half of the shares of its Peruvian unit to its Latin American holding company on Tuesday, in a step closer to an initial public offering.

It also said it planned to invest $2 billion in its Argentine unit in 2013 and 2014. Telefonica's Latin American businesses now account for more of its revenue than recession-hit Europe.

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