A year has now passed since Airtel SA ended state carrier Telefonica de Espana SA’s cellular telephony monopoly. Over the year Airtel has given employment to 1,600 people and invested some $620m, besides the $670m it had to pay to receive the license, for which the European Commission is insisting it should be compensated. The arrival of competition in this sector led to an explosion in the use of mobile phones in Spain, since prices dropped considerably. In one year Airtel has grown beyond it s wildest dreams. Every set of figures it forecasted has been exceeded, but not just the good ones referring to the number of subscribers and the revenue to be gained – its losses and debts are also much higher than anticipated. Airtel currently has 350,000 subscribers using its Groupe Special Mobile digital service and expects 550,000 by the year-end. Revenue of some $232m foreseen for this year is almost matched by the losses expected – around $220m.
Additional sacrifices
The aggressive advertising campaigns, the policy of promotions, gifts and accessories as a means to publicize its brand name and the improvements to the network have all served to attract more clients than the company had hoped for, but as a result, short-term investments have had to be increased and additional sacrifices have been demanded of the shareholders to compensate for the losses incurred. In the course of the present financial year Airtel has increased its capital by $348.8m, 20% mor e than initially anticipated, with another injection of $232.6m due in March 1997. Following the departure of Caixa Cataluna SA and Ibersuizas SA, there is now a commitment from the current nucleus of shareholders – Banco Central Hispano, Banco Sant ander, savings banks Bilbao Bikaia Kutxa, Caja Asturias, Guipuzcoa Donostia Kutxa and Unicaja, Ineuropa, electric company Union Fenosa SA, Corporacion Alba SA, Torreal SA and technological partners Airtouch Communications Corp and British Telecommun ications Plc – to stay put for at least five years. The flood of new clients has also obliged Airtel to increase the number of its switching centers to 18 from 13, with the capacity to handle an average of 200,000 calls, while base stations will number 2,000 by next December. Airtel currently covers 80% of the population with its service. A new network management center will be open in Alcobendas, Madrid and a third may well be needed in the capital, undoubtedly the jewel in Airtel’s crown, si nce there are 90,000 subscribers there and 30% of all Airtel’s national traffic is concentrated in Madrid. Since October 1995 the price of telephones has come down by 35% to 45% and there are now a total of 2.1m mobile phone users in Spain, of which Telefonica may claim 1.3m subscribers to its MoviLine analog service and 527,000 users of its MoviStar digital service. A year ago it was thought Spain could top 5 million users by the year 2000 – this figure has been revised to 8 million, due to the rampant interest thus far. For its part, Airtel is aiming at 1 million clients by 1997 and profit for the first time the following year. Managing director Ignacio Galan recently promised a further fall in rates of 10% to 12% by the end of the ye ar, since Airtel is very close to reaching an agreement with Telefonica that will cut the rates it pays for use ica’s lines when establishing a link between a mobile phone and the fixed network. For this service, Airtel currently must pay Telefonica $0.12 per minute on week-days and $0.08 per minute at week-ends.
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