Is WhatsApp Hurting European Telecom Companies?

Spain’s three largest wireless service providers, Telefonica (NYSE:TEF), Vodafone (NASDAQ:VOD), and Orange, were fined a record 120 million euros, or $159 million, on Thursday by Spanish regulators for exorbitant text messaging rates.

As Reuters reported, Spain’s National Competition Commission determined that the operators had “exploited their dominant position between 2000 and 2009” by overcharging customers. As a result, Telefonica will be fined 46.5 million euros, while Vodafone and Orange will have to pay penalties of 43.5 million euros and 30 million euros, respectively.

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Text messaging rates have increased as revenues from the service have diminished. In Spain, messaging generated 419 million euros in the fourth quarter of 2008, but only 184 million euros in the second quarter of 2012, according to the country’s national telecommunications regulator CMT. Carriers have experienced increasing competition from free instant messaging services like WhatsApp, which has 100 million active daily users. WhatsApp and similar apps utilize the mobile device’s Internet connection, rather than SMS service, to send messages.

All three operators have said they will appeal the decision.

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