Telefónica Launches O2 in Spain

Telefónica Launches O2 in Spain

Telefónica has introduced its O2 brand in Spain. Targeting the budget market, O2 will feature mobile-only and convergent (fiber plus mobile) offerings. The mobile plan comes with 20 GB of data plus unlimited national calls and SMS for €20.00 (US $23.58) a month, while the convergent offer includes the same mobile service plus symmetric fiber broadband with speed up to 100 Mbps and a landline with unlimited national calls for €45.00 (US $53.06) a month. Customers may also add up to three additional mobile lines with 10 GB of data, unlimited calls and SMS for €15.00 (US $17.69) each.

O2 will be activated in “beta mode” in the coming days, ahead of a mass market launch that Telefónica said would take place “after the summer.” Telefónica stated that O2 will be a “premium” service, while its youth-oriented Tuenti brand will be maintained as a low-cost alternative.

Telefónica said that because of Spanish regulations from 2016 having to do with competition in the fiber market, these prices will only be applicable in the 66 municipalities that the regulator, CNMC, deemed competitive. In other municipalities, the O2 convergent offer will cost €58.00 (US $68.39) a month, but the operator said it will implement a system to compensate customers for the €13.00 (US $15.33) price difference and adjust the price accordingly whenever the city becomes a competitive area.

Tarifica’s Take

It appears that in introducing the O2 brand in Spain, Telefónica is aiming at a market sector that is budget-conscious but that nonetheless wants converged offers with fixed line service. The fact that the operator intends to keep its MVNO Tuenti intact indicates that it considers the market for O2 to be a distinct one. Tuenti, which originated as a social-media network, is for the youth demographic in particular and offers the lowest prices. By launching another MVNO under the O2 brand—which already has name recognition from its operations in the U.K. and Germany, Telefónica can capture a new market without compromising either its Tuenti brand or its main brand for MNO service, Movistar. Maintaining O2, which is being characterized as a relatively “premium” service, alongside Tuenti and Movistar enables the operator to slice its market more finely.

O2, which boasts low prices but offers landline and fiber internet for the home, will likely be quite appealing to those users who want more than just the least expensive mobile-only option—although O2’s mobile-only offer is competitively priced. Telefónica is the leader in fiber development in Spain (thus the strictures placed on it by the regulator with regard to the 66 municipalities), which is itself the number-one country in Europe for fiber-to-the home penetration. Fiber has proved to be a key differentiator among Spanish operators, and Telefónica’s competitors Vodafone and Orange have had to play catch-up.

With O2, Telefónica is mounting a direct challenge to the smallest of Spain’s four operators, MasMóvil, which has been growing its market share very rapidly recently. MasMóvil also offers converged services (fiber and mobile) at low cost and with a very simple pricing structure.