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Spanish telecom operator, Telefonica S.A. (TEF - Analyst Report) has renewed its MVNO contract with the Spanish cable TV service provider, Ono for another two and a half years. The terms of the contract were not disclosed.

Ono, which offers triple-play services (voice, internet and cable) to price sensitive customers across the country, has entered into an MVNO agreement with Telefonica S.A. since 2007.

Domestic competition remains a major concern as the unbundled local loop (ULL) regulation is forcing Telefonica to open its network to alternative providers. ULL regulation, coupled with increased exposure of direct access competitors, continues to be major reasons behind wireline telephony access erosion. Telefonica Spain registered a net loss of roughly 0.5 million and a loss of 0.9 million retail access lines in 2011 and 2010, respectively.

So, extending its contract with Ono will help the company to safeguard its market share in the highly competitive Spanish telecom market.

In the recently concluded quarter, Telefonica reported its fourth-quarter 2012 results where the company recorded revenues of €15,837 million ($20,541 million) that dropped 2% year over year.

So, to improve its financial results as well as to expand its market share, Telefonica launched upgraded 3G mobile broadband networks –– High Speed Packet Access Plus (HSPA+) and Dual Cell HSPA. The company is further working to deploy LTE services in urban areas and also taking initiatives to adopt new technologies like Voice over LTE (VoLTE) to drive its top line.

Telefonica S.A. currently has a Zacks Rank #3 (Hold).

Other Stocks to Consider

Other stocks to consider in the telecom sector are Verizon Communications Inc. (VZ - Analyst Report), Sprint Nextel Corp. (S - Analyst Report) and AT&T Inc. (T - Analyst Report). Both AT&T and Sprint have a Zacks Rank #3 (Hold) while Verizon has a Zacks Rank #2 (Buy).

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