Problem Definition
Altura Telecom is a regional telecom operator based in Valencia, Spain. It sells mobile services under its own brand over a host operator's network, and it owns a fibre broadband network in the Valencia and Murcia regions. Altura has 800,000 mobile lines, about 1.3% of Spain's approximately 63 million mobile lines. The market is highly concentrated: the three largest operators hold approximately 86% of lines, and together with the fast-growing low-cost operator Digi they hold approximately 98%. Altura is one of the small operators that share the rest.
Altura's mobile business earns an average of €11.50 per line per month (ARPU). That is slightly above the Spanish average mobile revenue per line of approximately €10.25 a month, which fell about 5% in a year. Mobile revenue is approximately €110M a year (800,000 x €11.50 x 12). Two years ago, the mobile business had an EBITDA margin of 22%. Today it is 14%, or approximately €15.5M.
The main cause is churn. Altura now loses 2.0% of its mobile lines every month, up from 1.4% two years ago. Spain's mobile market has become a price war. Digi offers unlimited calls and data for approximately €10 a month and 50 GB for approximately €7. It gained approximately 770,000 lines from rivals through number porting in 2025 and another approximately 340,000 in the first half of 2026. At the other end of the market, the leading premium operator has cut its churn to a record low of 0.7% a month by selling fibre-and-mobile bundles.
The CEO asks: How much is churn really costing Altura, and what should it do to restore profitability?
Exhibit 1Altura Mobile Business, Two Years Ago vs. Today
| Metric | 2024 | 2026 (run-rate) | Change |
|---|---|---|---|
| Mobile lines | 880,000 | 800,000 | −9% |
| ARPU (€ per line per month) | 12.00 | 11.50 | −4% |
| Monthly churn | 1.4% | 2.0% | +0.6 pts |
| Mobile revenue | €126.7M | €110.4M | −13% |
| EBITDA margin | 22% | 14% | −8 pts |
| EBITDA | €27.9M | €15.5M | −44% |
Revenue = lines x ARPU x 12. Spanish market average mobile revenue per line: approximately €10.25 a month, −4.7% year on year.
Source: Altura Telecom case file
Additional InformationAsk for dataInterviewer’s data
If asked, please share that:
- Altura pays the host network and interconnection fees of about €5.00 per line per month, so each line contributes about €6.50 a month (€11.50 − €5.00)
- Altura adds about 150,000 new lines a year. Each new line costs about €90 to acquire (commissions, SIM, welcome promotions)
- Altura's fibre network passes about 40% of its mobile customers' homes
- Retention today is reactive. Customers are offered a discount only when they call to cancel, and most customers who switch simply port their number without calling
Question 1Structuring
How would you structure an analysis of Altura's profit decline and the role churn plays in it?
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
Additional InformationAsk for dataInterviewer’s data
- Share the market context: Spain has approximately 63 million mobile lines. In May 2026 about 476,000 lines switched operator, down about 7% on a year earlier, and Digi and the leading premium operator were the only large operators winning more lines than they lost
Try it first, then checkCheck my answerModel answer
A strong structure has three branches:
1. Revenue
- a) Number of lines: gross additions − lines lost (churn), trend over time
- b) ARPU: tariff mix, retention discounts, pressure from low-cost prices, extra services (roaming, add-ons)
2. Costs
- a) Variable: fees to the host network, interconnection, per line
- b) Acquisition: cost per new line x gross additions (needed just to replace churned lines)
- c) Retention: discounts and save offers
- d) Fixed: staff, IT, brand marketing, shops
3. Churn drivers (the diagnostic core)
- a) Who churns: prepaid vs. contract, mobile-only vs. bundled with fibre, with or without a financed handset
- b) Where they go: low-cost rival (price) or premium rival (network, bundles)
- c) Why: price, network quality, service, end of contract
Hypothesis to test: most of the profit decline comes from mobile-only customers leaving for Digi on price. Altura cannot win a price war against a rival with lower costs, so it must retain its most valuable customers in other ways.
What the interviewer is looking forInterviewer’s viewInterviewer’s view
A good candidate uses a profit tree (revenue: lines x ARPU; costs: variable network costs, acquisition costs, fixed costs) and places churn in it. A strong candidate shows that churn hurts profit in three ways: lost revenue from customers who leave, acquisition spending to replace them, and lower ARPU because of retention discounts. An excellent candidate adds segmentation early (who is churning, and where do they go?), since the response to a price-driven prepaid customer is very different from the response to a fibre-and-mobile customer.
So What? cascade:
- Level 1: Altura is losing customers faster than before
- Level 2: churn hits profit three times, through lost contribution, replacement cost and discounting, so a small change in churn has a large impact on profit
- Level 3: the key question is not "how do we stop churn?" but "which churn is worth stopping, and at what cost?"
Question 2Numeracy
How much is churn costing Altura each year? And what is it worth to reduce monthly churn from 2.0% to 1.5%?
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
Additional InformationAsk for dataInterviewer’s data
- Contribution per line: €6.50 a month (€78 a year)
- Acquisition cost: €90 per new line
- Assume, for simplicity, that the base stays at 800,000 lines and that a customer's expected lifetime in months = 1 ÷ monthly churn rate
Try it first, then checkCheck my answerModel answer
Step 1: Lines lost each year
- 800,000 x 2.0% x 12 = 192,000 lines a year
- Gross additions 150,000, so the base shrinks by 42,000 lines a year
Step 2: What that costs
- Contribution lost (run-rate): 192,000 x €78 = approximately €15.0M a year
- Acquisition spending on replacement lines: 150,000 x €90 = €13.5M a year
- These two figures together (€28.5M) are almost twice Altura's EBITDA (€15.5M)
Step 3: Customer lifetime value
| Monthly churn | Expected lifetime | Lifetime contribution | Minus acquisition cost | CLV |
|---|---|---|---|---|
| 2.0% | 1 / 0.020 = 50 months | 50 x €6.50 = €325 | − €90 | €235 |
| 1.5% | 1 / 0.015 = 66.7 months | 66.7 x €6.50 = €433 | − €90 | €343 |
Cutting churn by half a point raises the value of every customer by about €108 (+46%).
Step 4: Value of cutting churn to 1.5%
- Lines lost at 1.5%: 800,000 x 1.5% x 12 = 144,000
- Lines saved: 192,000 − 144,000 = 48,000 a year
- First-year value per saved line: €78 contribution + €90 acquisition cost avoided = €168
- Total: 48,000 x €168 = approximately €8.1M a year, or about 52% of current EBITDA (8.1 / 15.5)
Insight: Churn is the single biggest profit lever Altura has. But these numbers use average values. The next question is whether the customers who leave are average.
What the interviewer is looking forInterviewer’s viewInterviewer’s view
A good candidate calculates the lines lost, the contribution lost and the replacement spending. A strong candidate calculates customer lifetime value (CLV) at both churn rates and puts the benefit in the context of EBITDA. An excellent candidate adds that the value of saving a line is roughly one year of contribution plus the acquisition cost Altura no longer needs to spend to replace it, and states that this is a simplified first-year view.
Question 3Judgement & Insights
Exhibit 2 breaks down Altura's base and churn by segment. What does it tell you, and where should Altura focus?
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
Exhibit 2Altura Mobile Base and Churn by Segment
| Segment | Lines | ARPU (€/month) | Monthly churn | Lines lost per month | Main destination of leavers | Main reason | In Altura fibre footprint |
|---|---|---|---|---|---|---|---|
| Prepaid | 160,000 | 7.00 | 3.5% | 5,600 | Digi (65%) | Price | 30% |
| SIM-only contract | 360,000 | 11.00 | 2.2% | 7,920 | Digi (55%) | Price | 45% |
| Contract with financed handset | 120,000 | 16.00 | 1.0% | 1,200 | Premium operators (60%) | Network, devices | 50% |
| Fibre + mobile bundle (mobile part) | 160,000 | 13.75 | 0.8% | 1,280 | Premium operators (70%) | Bundle offers | 100% |
| Total | 800,000 | 11.50 | 2.0% | 16,000 |
Weighted ARPU: (160 x 7.00 + 360 x 11.00 + 120 x 16.00 + 160 x 13.75) / 800 = €11.50. Weighted churn: 16,000 / 800,000 = 2.0%.
Source: Altura Telecom case file
Additional InformationAsk for dataInterviewer’s data
- Share Exhibit 2
- Variable network cost is about €5.00 per line per month in every segment
Try it first, then checkCheck my answerModel answer
1. Where churn happens
- Mobile-only customers (prepaid + SIM-only) account for (5,600 + 7,920) / 16,000 = 84.5% of lines lost
- Bundled customers churn at 0.8% a month, about one-third of the SIM-only rate (2.2%). The bundle is the strongest retention tool Altura has
2. Where value is lost (annual contribution lost, by segment)
| Segment | Lines lost per year | Contribution per line per year | Contribution lost |
|---|---|---|---|
| Prepaid | 5,600 x 12 = 67,200 | (7.00 − 5.00) x 12 = €24 | €1.6M |
| SIM-only | 7,920 x 12 = 95,040 | (11.00 − 5.00) x 12 = €72 | €6.8M |
| Handset | 1,200 x 12 = 14,400 | (16.00 − 5.00) x 12 = €132 | €1.9M |
| Bundle | 1,280 x 12 = 15,360 | (13.75 − 5.00) x 12 = €105 | €1.6M |
| Total | 192,000 | approximately €12.0M |
- The true run-rate cost is approximately €12.0M, not €15.0M. The average overstates it because churners are mostly low-ARPU customers
- SIM-only contracts account for 57% of the value lost (6.8 / 12.0). Prepaid is 35% of the lines lost but only 13% of the value lost
3. Where to focus
- SIM-only customers inside the fibre footprint (45%, about 162,000 lines): move them into fibre-and-mobile bundles, which cuts their churn from 2.2% to about 0.8%
- SIM-only customers outside the footprint: use targeted, data-driven retention offers for the customers most likely to leave, not blanket discounts
- Prepaid: do not fight Digi on price. Each prepaid customer contributes only €2 a month, and Digi's prepaid offers start at approximately €3 a month. Keep acquisition spending on prepaid to a minimum
- Handset and bundle customers: already loyal. Protect them with network quality and device offers, and watch the premium operators
What the interviewer is looking forInterviewer’s viewInterviewer’s view
A good candidate sees that most churn comes from mobile-only customers. A strong candidate recalculates the cost of churn by segment and finds it is lower than the average-based estimate (about €12.0M, not €15.0M), because low-value prepaid customers churn most. An excellent candidate concludes that SIM-only contract customers are the real battleground (more than half of the lost contribution). Of these, the ones inside the fibre footprint can be moved into bundles, and the ones outside it need targeted offers. Prepaid churn to Digi is expensive to fight and worth little.
Push back if the candidate says "match Digi's prices". Ask what that would do to revenue from the large majority of customers who are not about to leave (only 16,000 of 800,000 lines leave in a given month).
So What? cascade:
- Level 1: prepaid customers churn fastest (3.5% a month)
- Level 2: churn is concentrated in mobile-only customers, but the value lost is concentrated in SIM-only contracts
- Level 3: bundled customers churn about one-third as often as SIM-only customers, so moving SIM-only customers inside the fibre footprint into bundles addresses churn at its root. Price-matching Digi would not
Question 4Creativity
What retention ideas could Altura use? After brainstorming, evaluate the two offers the marketing team has proposed for SIM-only customers.
Hint · Creativity
Brainstorm in buckets (e.g. internal vs external, short vs long term) so ideas stay structured and you can see gaps.
Exhibit 3Marketing Team's Retention Proposals for SIM-only Customers
| Offer A: blanket discount | Offer B: targeted discount | |
|---|---|---|
| Who receives it | All 360,000 SIM-only customers | 72,000 SIM-only customers (riskiest 20%) flagged by a churn-prediction model; they account for half of SIM-only churn |
| Discount | €2 a month for 12 months | €3 a month for 12 months |
| Expected effect | SIM-only churn falls from 2.2% to 1.6% a month | Churn of flagged customers falls by 40% |
Source: Altura Telecom case file
Additional InformationAsk for dataInterviewer’s data
Share Exhibit 3 once the candidate has brainstormed. Tell the candidate that the value of each saved SIM-only line in the first year is €72 contribution + €90 acquisition cost avoided = €162.
Try it first, then checkCheck my answerModel answer
Brainstorm
Product and bundle
- Fibre-and-mobile bundles inside the footprint, with the mobile line discounted within the bundle
- Family and multi-line plans (several SIMs on one account are harder to move)
- Shared or rolling data allowances, and extra data at renewal instead of price cuts
Targeting and timing
- Churn-prediction model using usage, complaints, contract end dates and network problems
- Proactive contact before a contract ends, not only when the customer calls to cancel
- Save offers inside the app when a customer looks at cancellation or porting pages
Brand and portfolio
- A separate low-cost digital brand for price-sensitive customers, with minimal service costs, so price cuts do not spill over to the main brand
- Local loyalty: regional content, sports sponsorship, in-store service in Valencia and Murcia
Service and network
- Fix network black spots that drive complaints; use the owned fibre network for better indoor coverage via Wi-Fi calling
- First-call resolution in customer service
Evaluating the two offers
Offer A: blanket €2 discount
- Cost: 360,000 x €2 x 12 = €8.64M
- Lines saved: 360,000 x (2.2% − 1.6%) x 12 = 25,920 a year
- Benefit: 25,920 x €162 = €4.20M
- Net: approximately −€4.4M. The offer destroys value because most of the discount goes to customers who would have stayed anyway
Offer B: targeted €3 discount
- Flagged customers lose 7,920 x 50% = 3,960 lines a month, a churn rate of 3,960 / 72,000 = 5.5% a month
- Lines saved: 3,960 x 40% = 1,584 a month = 19,008 a year
- Cost: 72,000 x €3 x 12 = €2.59M
- Benefit: 19,008 x €162 = €3.08M
- Net: approximately +€0.5M. The offer is positive, but only because it is targeted. The margin is thin, so the model's accuracy must be tested before full rollout
What the interviewer is looking forInterviewer’s viewInterviewer’s view
A good candidate brainstorms in buckets and evaluates both offers correctly. A strong candidate sees that Offer A mostly pays customers who were never going to leave. An excellent candidate sets a rule for retention spending: only pay for offers where the value of the saved customers exceeds the discount given to everyone who receives it. They also propose combining targeting with bundling.
Question 5Synthesis
The CEO has five minutes before her board meeting. What is your recommendation?
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
Additional InformationAsk for dataInterviewer’s data
- The team estimates that 40,000 SIM-only customers inside the fibre footprint (about a quarter of those eligible) would take a fibre-and-mobile bundle within a year
- A bundle adds about €12 a month of fibre contribution per customer. Altura would give €3 a month off the mobile line inside the bundle, and fibre installation costs about €150 per home (one-off)
- Bundled customers churn at about 0.8% a month
Try it first, then checkCheck my answerModel answer
Recommendation: stop competing on price and compete on bundles and targeting. Move SIM-only customers inside the fibre footprint into fibre-and-mobile bundles, use a targeted retention offer for the rest, and do not launch a blanket discount. Together these moves raise EBITDA by approximately €5.9M a year (+38%) and cut monthly churn from 2.0% to about 1.7%.
1. Why:
- Churn costs Altura approximately €12M a year in lost contribution, plus €13.5M of acquisition spending to replace lost lines. SIM-only customers account for 57% of the value lost
- Altura cannot win on price. Digi offers unlimited mobile for approximately €10 a month, and Digi's own revenue per customer has fallen from approximately €9.8 to €7.8 a month over five years. Bundles are what keep customers: the leading premium operator runs at 0.7% monthly churn
2. Impact
| Initiative | Calculation | Annual EBITDA impact |
|---|---|---|
| Bundle upsell: fibre contribution | 40,000 x €12 x 12 | +€5.76M |
| Bundle upsell: lines saved | 40,000 x (2.2% − 0.8%) x 12 = 6,720 x €162 | +€1.09M |
| Bundle upsell: mobile discount | 40,000 x €3 x 12 | −€1.44M |
| Targeted retention (Offer B) | €3.08M − €2.59M | +€0.49M |
| Total recurring | approximately +€5.9M |
- One-off investment: 40,000 x €150 = €6.0M of fibre installations, paid back in about one year
- Monthly churn: lines lost fall by 1,584 (Offer B) + 560 (bundles: 40,000 x 1.4%) = 2,144 a month, from 16,000 to 13,856 = approximately 1.7%
- EBITDA: €15.5M → approximately €21.4M
3. What not to do
- No blanket discount (Offer A loses approximately €4.4M)
- No price-matching on prepaid. Cut acquisition spending there and consider a separate low-cost digital brand if the prepaid segment is to be kept at all
4. Risks and next steps
- Bundle take-up below 40,000: pilot in one city for three months and measure take-up and churn
- Model accuracy: Offer B's margin is thin, so run it as a test against a control group before full rollout
- Premium operators targeting bundle customers: protect the 160,000 bundle customers with network quality and loyalty benefits
- Next steps: build the churn model in 8 weeks, launch the bundle pilot, and review acquisition spending by segment
What the interviewer is looking forInterviewer’s viewInterviewer’s view
A good candidate gives a clear answer first, with numbers. A strong candidate combines the bundle move and the targeted offer, rejects the blanket discount, and quantifies the impact on EBITDA and churn. An excellent candidate also says what Altura should not do (a price war with Digi) and names the key risks and next steps.
Data Sources
Market facts in this case come from the public sources below. Altura Telecom and all company-specific figures (lines, ARPU by segment, churn rates, costs, retention offers) are fictional and illustrative, set to be consistent with these benchmarks.
| Fact used in the case | Publisher, title, year | URL |
|---|---|---|
| Spain had 62.96 million mobile lines in May 2026; 475,877 mobile number ports in May 2026 (−6.6% year on year); Movistar, Vodafone and MasOrange held 85.6% of mobile lines, 98.1% including Digi; Movistar and Digi were the only operators with net gains | CNMC (Comisión Nacional de los Mercados y la Competencia), "Las líneas móviles rozaron los 63 millones en España", 2026 | https://www.cnmc.es/prensa/datos-mayo-telecos-20260625 |
| Spanish telecom retail revenue +2.2% in 2025; top three operators held 74.2% of retail revenue; 64.2 million mobile lines in 2025 | CNMC, "El sector de las telecomunicaciones y el audiovisual creció un 2,2 % en 2025", 2026 | https://www.cnmc.es/prensa/inf-anual-telecos-20260622 |
| Mobile number-porting net gains: Digi approximately +770,000 in 2025 and +336,600 in H1 2026; Movistar +118,300; MasOrange −246,690; Vodafone −90,385 in H1 2026 | El Español / Invertia, "Digi suma 336.000 líneas móviles en el primer semestre por portabilidad y Movistar supera las 118.000 altas", 2026 | https://www.elespanol.com/invertia/empresas/tecnologia/20260702/digi-suma-lineas-moviles-primer-semestre-portabilidad-movistar-supera-altas/1003744307716_0.amp.html |
| Average mobile access revenue in Spain approximately €10.25 per line per month (−4.7% year on year, Q3 2025); Digi revenue per customer down from €9.8 to €7.8 a month over five years | Redes&Telecom, "Así fueron las telecomunicaciones en España en el tercer trimestre de 2025" (Nae telecom barometer), 2026 | https://www.redestelecom.es/comunicaciones/asi-fueron-las-telecomunicaciones-en-espana-en-el-tercer-trimestre-de-2025/ |
| Telefónica España churn at a record low of 0.7% (Q2 2026); convergent ARPU approximately €91 | El Conciso, "Telefónica España acelera al 2,9% con el 'churn' en mínimos y las líneas IoT triplicadas en un año", 2026 | https://www.elconciso.es/empresas/telefonica-espana-acelera-churn-en-minimos-triplica-lineas-iot_0_2007619835.html |
| Digi mobile tariffs: contract plans from €3 a month (5 GB), 50 GB for €7 a month; unlimited plan €10 a month (€8 with fibre); prepaid plans from €3 a month | Digi Spain, "Tarifas Móvil" and "IlimiTODO", 2026; Kelisto, "Tarifas de Digi con fibra y móvil" (August 2026) | https://www.digimobil.es/movil/ ; https://www.kelisto.es/internet/consejos-y-analisis/las-mejores-alternativas-a-las-tarifas-de-digi-mobil-6664 |
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