Telefonica COO supports consolidation in Spanish telecom crowd

BARCELONA (Reuters) - A top official at Telefonica said on Wednesday he would support consolidation in Spain's fiercely competitive telecommunications market, where takeover speculation has been rife.

The telecoms market in the euro zone's fourth-largest economy has become ever-more crowded, squeezing profits and prompting British peer Vodafone to propose cutting up to one fifth of its workforce there.

"We would be supportive of consolidation of the Spanish market if that scenario were to take place," Chief Operating Officer Angel Vila told the Morgan Stanley European Technology, Media and Telecoms conference in Barcelona.

"We have seen rumors in the press about other players," Vila said, after a report last month that domestic challenger MasMovil planned to buy Vodafone's Spanish business. Both companies denied that report.

Already spoiled for choice with four national operators, Spaniards will soon be offered a fifth when regional operator Euskaltel realizes a plan to sell services under the Virgin brand.

Vodafone Chief Executive Nick Read told the conference its restructuring in Spain had been painful but effective and offered advice on operating in that market to Telefonica and Orange, Europe's No.3 provider.

"They have to be rational, they have to find growth. In the mid to high end pricing needs to move up," Read said, adding that Vodafone had already taken those steps.

Telefonica posted 0.1% growth in organic core earnings in Spain in the third quarter, compared with a 1.6% drop in the previous three months.

"The trends are very supportive and we are confident we can continue to achieve the best margins" on core earnings and operating cash flow, Vila said.

Looking to Brazil, where Telefonica makes about a quarter of its core profit, Vila said cash-strapped carrier Oi had started a process to sell its mobile business and Telefonica would look at that.

"This could be an interesting situation where there could be synergies," Vila said.

(Reporting by Isla Binnie; Additional reporting by Paul Sandle; Editing by Edmund Blair)