Orange Spain is planning to cut close to 500 jobs during May and June as the effects of the COVID-19 pandemic continue to exacerbate tough local market conditions.

The Orange Group has already signaled that revenue at its Spanish business fell markedly by 7.4% in the first quarter of 2021 (Q1 2021). Orange Spain, the second-largest operator on the market after Telefonica's Movistar, has now announced that it will eliminate up to 485 positions in order to "guarantee the competitiveness of the company," and will start negotiations with worker representatives in the coming days.

In a statement, Orange Spain said that the "telecommunications sector has been experiencing loss of income for years as a result of the hyper-competitiveness of the market and the number of low-cost players. This poses a great challenge for the company."

The planned cuts account for around 15% of the Spanish unit's workforce, according to local website El Mundo. Orange Spain is said to employ about 3,200 people, although the number rises to 7,700 employees when taking into account retail and call center staff.

Spain remains a drain

To be sure, Orange has been trimming employee numbers for a number of years. Staff numbers across the entire group have fallen from 156,191 in 2015 to 142,150 in 2020 due to divestments and efficiency measures, and they dropped by 4,618 last year.

However, Spain has been a particular drain on the group. In its results for Q1 2021, Orange noted that retail services in Spain declined 10.2% year on year "principally due to the impact of the repricing of our existing customer base" in the second half of 2020.

It did nevertheless note that this repositioning of offers resulted in a positive commercial performance in Spain for the third consecutive quarter, with 10,000 net additions for convergent services, 49,000 additions for fiber-to-the-home and 24,000 mobile contract additions excluding M2M.

Spain has been a hotly contested market for years, driven by an early and aggressive move by Telefónica into converged offerings of fixed, mobile and TV services as well as a large number of low-cost players.

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Orange has been no slouch, to be fair. It launched its own convergence offering under Orange Love and also acquired Jazztel to boost its fixed network presence. Furthermore, it provides competitive mobile pricing under sub-brands such as Amena, Simvo and República Móvil.

Másmóvil, Spain's fourth-largest operator, has become an increasingly big thorn in the side of Orange as well as its nearest rivals Movistar and Vodafone Spain. In March, the group announced a takeover bid for Basque operator Euskaltel and looks set to gain a larger slice of the market.

Traditionally a regional player, Euskaltel branched out nationally last year under the Virgin brand. It has around 840,000 residential and business customers, with an annual turnover of €2.7 billion ($3.2 billion).

A mooted tie-up between Másmóvil and Vodafone Spain now seems all but dead if the Euskaltel deal goes through, however.

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— Anne Morris, contributing editor, special to Light Reading