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* Fixed line providers gain 344,000 mobile customers in Q1
* Seen growing further in competitive market
* Traditional operators not worried about expansion
By Clare Kane
MADRID, April 18 (Reuters) - Spanish fixed line telecomsproviders are gaining a bigger share of the country's shrinkingmobile market as cash-strapped consumers switch to bundledpackages offering mobile, internet and other services, data seenby Reuters showed.
Broadband specialist Jazztel and cable operator ONOgained more mobile customers than any other company in the firstquarter of 2013, according to the figures, which are regularlycollated but unpublished by the industry.
Jazztel, which will enter Spain's blue-chip IBEX 35 index next week, poached 208,850 clients from other operators inthe first three months of the year, while private equity-ownedONO added 135,201.
Both are mobile virtual network operators (MVNO) which meansthey rent network capacity from other mobile providers.
In the same period, former monopoly Telefonica andno. 2 player Vodafone together lost more than half a millioncustomers to rivals. Telefonica's market share fell to 36percent in January from 40 percent the year before.
Lluis Borrell, partner at consultancy Analysys Mason, saidTelefonica's bundled offer launched last Octobersignalled a shift to convergence in the Spanish market thatwould give firms offering multiple services an edge.
"I see a good position for the combination of someone like astrong cable operator with a MVNO," he said.
Virtual operators have only been active in Spain since 2006,after the European Commission recommended in 2003 that countriesopen up telecoms markets to more competition.
But they grew their mobile market share to over 9 percentfrom 6.5 percent in the 12 months to January 2013. Jazztelestimates it will have between 2.3 and 2.5 million mobileclients by 2017 compared with 343,000 at end-2012.
LONG LEGS
The increasingly competitive mobile market has beenshrinking since 2009 and is expected to contract further.
"This could potentially have very long legs indeed, you onlyneed to look at the UK market for an example of how durable thatcan be," said John Delaney, director of mobile research forEurope at market research firm IDC.
Cable-based Virgin Media, which has focused on sellingmobile as part of bundled packages, has a contract customer baseof 1.7 million compared with under 500,000 clients five yearsago and is Britain's no.5 player with 3 million mobile clientsoverall.
According to Jazztel, 25 percent of broadband connections inSpain will be part of convergent offers this year, increasing to60 percent in 2015, mirroring a similar trend across Europe.
ONO said last week that its mobile client base had grown 160percent over the last 12 months to over 500,000 customers, whileJazztel's mobile customer base grew 140 percent in 2012.
The major attraction of virtual operators, especially in amarket like Spain with a 26 percent unemployment rate, is theirlow prices. However, there is a limit to how far MVNOs, whichusually operate with low margins, can undercut competitors.
Spain's telecoms watchdog said contracts between MVNOs andthe operators whose network they use were private. However, insome countries operators usually stipulate how far virtualoperators can drop prices.
Traditional operators say they are unconcerned by rivals'rapid growth. Jazztel and ONO together have about 1.5 percent ofSpain's mobile market.
Sources at former monopoly Telefonica said it was "totallycompetitive and offers similar prices to any other operator, butwith the advantage of being a fully integrated operator".
No. 4 player Yoigo said: "In no way can MVNOssubstitute MNOs which make heavy investments in networks andtechnology which take time to turn profitable and without whichMVNOs would not even exist."
