MADRID, Feb 13 (Reuters) - Telefonica said onWednesday that margins in its Spanish business in the finalquarter of last year were among its best ever thanks to a newbundled offer that stabilised customer losses and to suspendingsmartphone subsidies in March.
"The last quarter was one of the best in our history interms of commercial activity and also in terms of bettermargins," Luis Miguel Gilperez, president of Telefonica Spain,told reporters.
The company is facing an uphill battle in its home market,where a prolonged recession and a 26 percent unemployment ratehave crushed consumer confidence. Telefonica's domestic revenuesfell by 13 percent in the first nine months of 2012.
The group reports results on Feb. 28 and investors want tosee whether it has managed to stem the decline in itsincreasingly competitive home market, where it shed over 3million mobile customers in 2012.
Gilperez said the October launch of Telefonica's "Fusion"package offering combined Internet, television, mobile and fixedlines services, had improved customer loyalty, helped take600,000 mobile contracts from competitors and boosted itsbroadband market share.
He said 1.5 million people had already signed up for the newoffer by the end of January, with nearly 15,000 peoplesubscribing to the offer daily.
"In order to improve investors' perception of the company,it is crucial to moderate the deterioration suffered in thedomestic market," Madrid-based broker Ahorro Corporacion said ina note to clients on Wednesday.
According to data from Spain's telecoms regulator, whileTelefonica's share of the mobile market shrank to 36.5 percentfrom 40 percent over 2012, broadband figures have improved sincethe launch of Fusion, with Telefonica attracting 42,780 newcustomers in December.
"For the first time in many quarters we have gone back tobeing the leaders in capturing new broadband business," Gilperezsaid. Telefonica attracted 125,000 new broadband customers inthe fourth quarter and has 48.3 percent share of the market.
The former monopoly halted subsidies on smartphones in Marchand was followed by Vodafone, which then reversed thedecision after heavy customer losses. Telefonica says it willnot go back on the decision, which has helped margins.
Mobile customers defected to Orange, which stilloffered smartphone subsidies, and cheaper virtual mobileoperators, which rent network space from established players.Virtual operators' share of the market grew to 8.92 percent atthe end of 2012 from 6.33 percent a year earlier.
Vodafone's third quarter results last week showed thechallenges facing operators in Spain. The company reported an 11percent drop in service - phone calls, messages and data -revenue and has said it will lay off staff in Spain.
Gilperez also said Telefonica would intensify its efforts toroll out fibre optic Internet, which offers faster speeds, toreach 8 million Spanish households by 2015.
Vodafone (VOD)