Coverage of the fiscal crisis in Europe rightfully centers around Greece — unemployment just hit a record 25.4 percent, rising for a 39th straight month — but the country is not alone in hanging on the brink of economic collapse. Spain, for one, is in rough shape, which has sparked an unexpected cost-cutting measure: millions of Spaniards are ditching their cell phones.
The number of mobile phone connections dropped by 242,000 in September, marking eight straight months of decline that saw a record drop of 380,000 subscribers in April. Global giants Telefonica and Vodafone have seen the biggest drops, while smaller providers offering super-cheap plans like Yoigo saw slight gains. The drops have also been fueled partly by an austerity tax that hit providers over the summer.
An interesting wrinkle noted by Reuters is that Vodafone and Telefonica previously used Spain as a test site for eliminating smartphone subsidies while also eliminating free or discount phones from their lineups. Vodafone said this week that it would bring subsidies back, but the strategy may be hurting the two giants right now. Without the contracts that usually come with subsidies, it’s easier to cut off their plans, and with new phones more expensive, it’s harder to entice someone new to sign up (or resign) with a shiny new gadget, especially when everyone’s broke.
For consumers, it’s a mixed bag. Here in the U.S., it’s obviously nice to get top-of-the-line phones for dirt cheap, and as Sprint’s trouble making money off iPhones suggested earlier this year, sometimes consumers score pretty sweet deals.
But that subsidy model in also the reason that many of us have long contracts and end up stuck with single carriers on expensive post-paid plans with no recourse when our “unlimited” data gets throttled or capped. Spain’s telecom providers are seeing the results of a mobile market that’s more volatile: when people’s wallets are pinched, they switch to cheaper carriers, use fewer minutes on prepaid plans, or simply drop their phones entirely, as millions are.
That’s already producing a price war in the country, and has brought subsidies back, which ultimately is a good thing for consumers. Imagine if it had been easier for customers to ditch their plans in droves as soon as their carrier capped their data; it’s tough to tell if anything would have ended up different, considering carriers are struggling to keep up with how much data we use, but it at least would have made them sweat. There’s an even broader question I’ll leave you with: How bad would things have to get for you to give up your phone?
Image: Angel Navarrete/Bloomberg
Follow Derek Mead on Twitter: @derektmead.