* Telefonica hikes prices 5-15 pct on most packages in Spain
* Hopes to grow domestic revenues for first time since 2008
* Move comes after networks investment, market consolidation
* But new regulations, consumer weakness may dent recovery
By Andrés González and Julien Toyer
MADRID, April 29 (Reuters) - Telefonica's move to hikeprices in Spain is a bold bet that could finally draw a lineunder a six-year slump, cut the firm's reliance on Latin Americaand give it a leg up over rivals on the lucrative premiumtelecoms market, sources and analysts say.
The telecoms giant, whose revenues have dropped 13 percentworldwide and 42 percent in Spain since 2008, has focused onfewer markets, cut debt and invested in new high-speed networksand exclusive television contents to try and regain its mojo.
The plan worked everywhere but at home, however, forcingTelefonica to raise tariffs before stiffer competition and newlaws increase the risk of a backlash from consumers who havejust started spending after years of hardship.
The price increases, which range between 5 percent and 15percent and will take effect on May 5, should add up to 300million euros ($326 million) to core profits, enough to meet themanagement's pledge to grow operating income in Spain in 2015.
But the move could also prove just as strategic for theformer monopoly as the launch in 2012 of all-included bundles offixed and mobile services, which helped stabilise its clientbase and set the stage for consolidation in Spanish telecoms.
Sector sources say that by attaching higher-speed internetservices to the hikes, Telefonica is sacrificing volumes inorder to cash in on its 12-billion-euro fibre optic network andcement its grip on premium customers, who offer juicer returns.
Official data shows the company controls 84 percent of thefibre optic market and, after buying Prisa's Canal+unit, it will also hold 70 percent of the pay-TV market.
Ultra fast internet and exclusive TV products are seen asthe key to winning the lion's share of the premium bundles' piewhich is seen having a growth potential of 500 percent to reach12 million clients and annual revenues of 10 billion euros.
"The client of these bundles tends to prioritise speed andquality over price. Those offers are targeting the medium-highresidential segment, which is the one with higher margins andthe most attractive," said Moody's analyst Carlos Winzer.
NO COINCIDENCE
The move's timing is no coincidence, sources also say, asTelefonica wants to take advantage of a dominant market positionto bind clients to its offers.
Spain's antitrust watchdog CNMC is set to force the firm toopen up its fibre optic network in most of Spain by-year-end andprices of domestic football rights may sky-rocket as a result ofa new sports law due to soon be passed.
Competition will also heat up, with Al Jazeera launching itsBeIn sports channel in Spain this summer and Netflix due to make available its video streaming service in September.
Meanwhile, analysts see no more than one in five clientsswitching to existing competitors. Teliasonera's Yoigoand Vodafone, which bought cable firm Ono last year,have also announced price hikes while Orange is busybuying Jazztel and unlikely to break ranks.
The British unit freshly sold, fixing Spain had also becomea necessity to hedge the currency, economic and political risksof Latin America, where expected consolidation in Brazil andMexico may translate into financial pressure in the short-term.
Latin America accounts for 50 percent of revenues, or 56percent without Britain in the total, up from 40 percent in2008.
Such a price-driven revamp is however fragile by nature andmuch of its success will depend on how consumers respond.
"Whilst the economic recovery is strong in Spain, the riskof pricing disruption in case of renewed economic weakness ishigher," Barclays analysts said in a note. ($1 = 0.9193 euros) (Editing by Anna Willard)
Vodafone (VOD)