I was reading in the news this morning that last month 526500 users switched cellular provider in Spain, the highest number ever. The main affected carriers are Telefonica’s Movistar and Vodafone. Both of them are struggling while more and more customers abandon them in favor of Orange, Yoigo and other virtual operators.

Why is this happening? There is no clear answer yet, but one of the reasons is pricing. Traditionally, communications in general have been expensive in Spain, mainly due to the fact that Telefonica pretty much owned everything and could charge whatever they wanted for ADSL, home phone and, for a while, cellular communications. Years ago, multiple alternative providers for home broad band connections entered the market and, despite having initially a really low quality (Jazztel became famous claiming 20Mb connections that would roughly go above 2Mb and that would be down most of the time… combined with a terrible customer support…), it eventually led the market to the current highly competitive and high quality broad band offer. In cellular communications it was pretty much the same, but things change faster. Vodafone was almost from the beginning a big player and, despite its eventual failure, Amena (later bought by Orange Telecom) added a third party to the game to makes thing even. They had the most popular commercials, but their network quality and coverage area was always known for being very poor.

Another major effect in Spain’s market is that the iPhone is not really owned by just on carrier. The same happens with every popular phone. So, no matter what provider you have, you can own an iPhone, a Nexus S, etc. Finally, in Spain we do not have the concept of the 2 year contract that ties you to a given carrier unless you want to pay a big penalty. Actually, in Spain contracts are very different. We do not pay a gross amount for minutes. Instead we pay for how much we use the phone (at a much cheaper rate that in the US… which leads to using the phone a lot… which often leads to a huge bill…) and we do NOT pay for receiving calls and receiving texts (I always found that one of the stupidest telecom-related things in the USA). Also, the more we use the phone, the more reward points we gather. So you can get a new fancy phone more often than every 2 years.

All in all, things are changing in Spain. As we always do (trust me, we Spaniards tend to be very cheap… if you want to find a high concentration of Spaniards try going to MoMA during Easter week on the day that it is free… it will actually work pretty much every day of the year that is free), we try to find the cheapest prize for everything and, unless they change their pricing policies, Telefonica and Vodafone will keep loosing customers… Specially now, with the current recession and 20% unemployment rate (that doubles for people under 35).