Telefónica invests in Joyent for cloud services
February 1, 2012
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Telefónica Digital signed a strategic partnership agreement with Joyent, a cloud services and technologies provider, including an undisclosed strategic equity investment.
The company said the partnership brings together Joyent’s self-developed cloud architecture with Telefónica’s global scale and infrastructure, and will particularly enhance Telefónica’s product offering to small- and medium-size enterprises and small office-home office customers.
The company was keen to emphasise that Joyent’s entire cloud software stack has been developed in-house from scratch, making it cheaper, more efficient, easier to operate, and show better performance than that of other cloud technology providers. Joyent currently has in excess of 12, 000 public cloud customers in the USA. A notable customer of the company, which was founded in 2004, is social network LinkedIn, which uses the Joyent platform for its mobile domain, and other subdomains of the main site. Joyent is also a Dell partner, providing technology with the vendor for a range of cloud software solutions.
“ This investment is further proof of our ambition in the area of cloud services and our strategy of working with the most innovative start-ups. Joyent’s technology fits perfectly with our in-house developed technologies and our cloud services model, and enables us to provide more competitive offerings to a broader range of customer segments. ”
– Matthew Key, Chief Executive, Telefónica Digital.
The strategic investment, made by Telefónica Digital’s Telefónica Ventures division, is the unit’s second investment since the creation of Telefónica Digital in September 2011, and forms part of a $85m (EUR65.3m) funding round for Joyent, led by European group Weather Investment II. In November 2011, the Telefónica division had declared an investment in Quantenna Communications, a specialist in Wi-Fi networking for home entertainment (Telefónicawatch, #60).
Joyent said that, throughout 2012, it will roll out a “collection of seamlessly connected, high-performance public clouds that serve global corporations with consistent computing services on every continent”. In bullish comments apparently designed to garner headlines, David Young, Chief Executive of Joyent, said he has his sights set on Amazon, the world’s largest provider of cloud computing services. He described Amazon’s cloud computing technology as a “junk yard” made up of all sorts of “taped together” technologies.
“ Amazon is the Kodak of the cloud. I don’t want to dump on Amazon, but I just don’t think you can look to a book seller and grocery store for cloud innovation. On the other hand, we’re building a cloud alliance around the globe. ”
– Young.
Telefónica making its presence felt through promised partnerships
On the launch of the Telefónica Digital division, it was stated that the unit would be working to bring flexibility to the telecoms giant through investments and partnerships with companies in emerging new markets and technologies. The Joyent investment is another example of the telco putting up the funds to back claims, and building a network of influence in areas it is targeting for growth.
Cloud services have seen the most headlines so far in terms of partnering, with a deal with start-up FeedHenry also flagged (see separate report), and an agreement to deploy Cisco Systems’ solutions in new offerings being developed for Telefónica’s newest data centre site in Spain (see separate report).
[Further reference: Telefónica boosts cloud capabilities with strategic investment in Joyent, Inc. -- Telefónica, 23 January 2012; Joyent secures $85m in venture funding to fuel global growth and continued innovation -- Joyent, 23 January 2012; Joyent grabs $85M from Weather Investment II, Telefónica to take on Amazon in cloud computing -- Venturebeat, 23 January 2012.]
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Telefonicawatch Report #85 January 2012 Executive Brief
February 1, 2012
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- O2 UK faces a potential backlash and regulatory penalties after being exposed inadvertently passing customers’ mobile phone numbers to all websites visited by its customers while browsing from their handsets. The operator apologised quickly for the error, while acknowledging that it was standard practice to send mobile number details for age verification sites and to support billing for trusted content partners. However, while this explanation fostered continued alarm among the media and customers, the sharing of the data for the company’s loyalty and reward schemes was somewhat brushed under the carpet. This is perhaps understandable because the privacy breach casts doubt on O2′s abilities to act as a reliable bridge linking content providers and businesses with its customer base. It is also a timely reminder of the sensitivity of customer details, as the telco builds its plans to position itself as a financial services provider. [pp.31-32.]
- Telefónica Digital is making its presence felt in the cloud services sector, and announced a partnership with, and strategic investment in, Joyent, a cloud services and technologies provider, with plans to offer the service provider’s cloud architecture to SME and SoHo customers across the Telefónica footprint. The division is also to launch a new cloud-based mobile applications development platform targeting UK enterprise customers, and enable them to create and deploy their own applications through a partnership with Irish startup FeedHenry. On a larger scale, Telefónica flagged the anticipated deployment of Cisco’s new CloudVerse products at its major new data centre in Madrid, which will be used to support a virtual data centre offering for major corporate clients. [pp.9-11.]
- Telefónica España is to participate in the launch of the GSM Association’s RCS-e service in Spain. The rich communications offering is expected to provide enhanced messaging, live video-sharing and file-transfer services, which could be used across Spain’s major mobile networks, and on a range of smart devices. The launch, which will also be supported by France Télécom’s Orange, and Vodafone, is set for the first half of 2012, and likely to be followed later in the year by a launch in Germany. Telefónica is once of five major European telcos backing the re-focused RCS offering, and, while there is considerable scepticism surrounding the future of the platform within the industry, the telco has indicated that it sees potential for RCS-e services to bloom in the emerging Latin American smart device market. [pp.14-15.]
- Telefónica Germany agreed a deal with Deutsche Telekom to use the telco’s fibre infrastructure to boost backhaul capacity, and tackle recent network performance weaknesses. Telefónica previously had a roaming agreement in Germany with the incumbent’s T-Mobile business, which suggests a good working relationship could be maintained between the parties, but the agreement raises questions over the effectiveness of Telefónica’s network investment in recent years. Telefónica Czech Republic, which already partners T-Mobile on network sharing, trumpeted the benefits of its deal, which has seen the roll out of 337 new base stations by each operator in 2011 — with a further 306 expected to be added in 2012. [pp.24, 25-26.]
- As Telefónica Group continues to adapt to the new organisational structure announced in 2011, a new holding company was created for the Spanish and UK elements of Telefónica Digital, and Telefónica Europe restructured its board, reducing the number of directors from fifteen to seven. [p.5.]
- Telefónica Digital confirmed earlier reports that its new headquarters will be at the AirW1 site in the West End of London. The central facility is expected to become a showcase for the division’s emerging capabilities, and the decision to bypass the East End’s nascent Silicon Roundabout suggests the site will be more about deal-making and image-building than a hub for innovation. The Digital division is also searching for a global public relations firm, to help the new business build its reputation and help underscore Telefónica’s credentials in a digital world. [p.8.]
- Telefónica UK’s launch of its O2 Wallet mobile contactless payment application was postponed, as the company took the decision to instead extend internal trials in order to ensure an adequate customer experience. [p.13.]
- Telefónica Digital’s technology incubator programme Wayra signalled its intention to launch within O2 territories, with the appointment of former O2 UK SME head Simon Devonshire as Head of Wayra Europe. [p.16.]
- Telefónica in Latin America agreed a second MVNO deal with Virgin Mobile, which will see the global brand launch services using Movistar networks in Colombia in 2012, as well as Chile. Further Virgin Mobile regional launches are planned in countries such as Mexico and Peru, but whether the network partnership between the companies will also expand is unclear. [p.17.]
- Telefónica signed an agreement with Sony Pictures to distribute the film company’s content via its video-on-demand platforms in Latin America. [p.17.]
- Telefónica in Brazil said that it has now connected one million broadband customers under the federal government’s Plano Nacional de Banda Larga national broadband programme, and intends to expand its PNBL coverage to an additional 71 cities in São Paulo state in 2012, taking the total to 300. Mobile business Vivo trumpeted its progress in rolling out 3G coverage across the country, but nevertheless appears to be falling behind on its schedule. [p.18, 19.]
- Movistar Mexico launched a second-line service, using technology from Movius, a specialist in unified communication solutions. [p.20.]
- Telefónica del Perú paid EUR38m to Sunat, Peru’s tax agency, as part of an ongoing dispute over a claim for over EUR570m in unpaid back taxes. The telco is continuing its legal challenge to the government’s levy, while it also negotiates a licence renewal. [p.22.]
- BNA, the German telecoms authority, cleared Telefónica Germany to expand 800MHz-based services to urban areas in the northern region of Schleswig Holstein. The company has now fulfilled its rural coverage obligations in seven of the country’s 16 states. [p.26.]
- Movistar España launched a mobile television application integrated with RIM’s BlackBerry Messenger social platform, called Imagenio Movistar Móvil, which enables customers to chat and access interactive features while watching TV. The integration of Social TV features could be a boost to mobile TV services, and there are reports the Spanish business may also be overhauling its IPTV offering, through closer partnership with Microsoft. [pp.13, 27-28.]
- Telefónica España successfully concluded testing on DWDM channel speeds of 400Gbps on a live fibre-optic network, although it added that it does not anticipate a commercial launch of the 400Gbps links until 2013 at the earliest. [p.29.]
- Telefónica España, along with mobile rivals, is to face a pricing investigation from CNC, the Spanish competition authority, following a complaint from BT España over high call origination and termination charges. [p.29.]
- Ofcom, the UK telecoms regulator, once again revised the rules of its forthcoming 4G spectrum auction, amid ongoing wrangling over the terms of the sale. This time Telefónica UK is seen as a significant beneficiary of the revision, which saw abandonment of plans to give market leader Everything Everywhere priority access to 800MHz frequencies, and dilution of previous restrictions on the amount of spectrum operators can acquire. The Czech telecoms regulator also gave an early indication of its intentions regarding the forthcoming 800MHz spectrum auction, slated for later in 2012. The ČTÚ said its goals include seeing that 90% of the Czech population have access to 4G services within three years, raising funds for the state, and improving competition, possibly through the entrance of a fourth player. [pp.23, 31-32.]
- Telefónica UK’s O2 Enterprise unit, in partnership with Fiberlink, launched Joined Up People, a new ‘Bring Your Own Device’ mobile management service. O2 Unify, Telefónica UK’s joint venture with IT services provider 2e2, won a three-year contract worth “several million pounds” from Network Rail to refresh the rail operator’s Cisco switch and router estate across 450 sites. [pp.33-34.]
- O2 UK pulled of a coup by winning a contract with Westminster City Council and the Royal Borough of Kensington & Chelsea, to create what it claims will be the largest free wireless hub in Europe, as part of its wider plan to roll out its the O2 wifi service nationwide. O2 beat incumbent provider BT Openzone to secure the deal. [p.35.]
- China Unicom achieved its goal of adding at least 25 million 3G subscribers in 2011. The company hit the target with a month to spare, after adding 3.4 million in November 2011. While the operator is outperforming rivals on adds, it is costing significant sums in handset subsidies as the product portfolio is expanded across a range of price points. [pp.41-42.]
- Telecom Italia Mobile has overtaken Vodafone Italia as mobile market leader, according to the regulator. In Brazil, TI’s mobile unit is also seeing its market share grow, as it focuses on a mobile-only strategy while its rivals (including Vivo) integrate and bundle. [pp.42-43.]
Telefonicawatch Report #62 January 2012 Snapshot
February 1, 2012
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Table of Contents
1 Executive brief
4 Group
4 Financial reports
4 S&P downgrades Telefónica outlook
5 Organisation
5 Telefónica formalises Telefónica Digital structure
5 Telefónica Europe restructures board
5 Financial reports
6 People
6 People movement highlights
7 Devices
7 Device highlights
8 Telefónica Digital
8 Operations
8 Telefónica Digital reveals new London HQ
8 New offices focused on making a big impression
9 Cloud services
9 Telefónica ties with FeedHenry for mobile cloud platform
9 BlueVia
10 Telefónica invests in Joyent for cloud services
11 Telefónica making its presence felt through promised partnerships
11 Telefónica signs up to Cisco CloudVerse
13 IPTV
13 Rumours of Microsoft deal to upgrade Imagenio
13 Mobile commerce
13 O2 Wallet launch postponed as testing continues
14 Rich communications
14 Telefónica and rivals launch RCS-e services
14 Wayra
15 RCS now needs to move beyond annual MWC PR puffery
15 A place for RCS in Telefónica’s growth markets
16 Wayra appoints European head
17 Latinoamérica
17 Regional
17 Movistar and Virgin build LatAm links with Colombia deal
17 Telefónica ties with Sony Pictures for LatAm content
17 Argentina
18 Brazil
18 Telefónica reports one million PNBL subscribers
19 Chile
19 Latest phase of American Tower deal completed
19 Boost for Telefónica as Entel/GTD merger scuppered
20 Costa Rica
20 Telefónica accuses ICE of anti-competitive practices
20 Mexico
20 Telefónica launches second line service with Movius
22 Telefónica calls for regulatory hard line in Mexico
22 Peru
22 Telefónica pays PEN 134m in tax dispute
22 Colombia
22 El Salvador
23 Europe
23 Czech Republic
23 ČTÚ sets out spectrum auction goals
23 Possibility for new player in market mooted
24 O2 Czech Republic: smartphones dominate sales
24 Symbian still dominates, Android closing for O2 Czech Republic
24 O2 praises T-Mobile network-sharing deal
24 Germany
25 Telefónica agrees network-sharing deal with T-Mobile
25 T-Mobile agreement confirms previous hints from O2
26 Operators revive earlier ties, but questions raised over O2 network
26 O2 freed for urban LTE rollout in Schleswig-Holstein
27 Telefónica selects Anite for LTE device testing
27 Spain
27 Movistar brings social mobile TV to BlackBerry
28 Mobile leading social TV drive
28 Telefónica launches universal broadband offer
29 Telefónica tests 400Gbps networks
29 Telefónica España, rivals face MVNO pricing probe
29 Ireland
29 Slovakia
31 United Kingdom
31 O2 faces customer anger over number leaks
31 O2 holds hands up and explains the cause…
32 …but may have brushed significance for loyalty schemes under the carpet
32 Privacy breaches pose risk to relationships, and financial services ambitions
32 O2′s responsiveness may not be enough to end matter
33 O2 launches Joined Up People; picks Fiberlink’s MaaS360
33 Joined Up continues to raise game for Vodafone challenge
34 O2 Unify wins Network Rail contract
34 O2 expands presence in Network Rail, pushing out BT?
35 O2 ties with London councils for free Wi-Fi
36 Ofcom revises 4G auction rules again
37 Rural coverage obligations also to be tweaked
37 EE offered 1.8GHz LTE consolidation, but still seen as main loser
38 Telefónica seen as likely buyer of EE 1.8GHz spectrum
38 Analyst reaction
39 O2 UK appoints new Chief Financial Officer
41 Associates and investments
41 China Unicom
41 Unicom achieves 2011 3G targets
41 China Unicom launches cheaper smartphones
42 Higher end devices still key element in portfolio
42 Telecom Italia
42 TIM Brasil focused on core services
42 Telecom Italia
43 TI takes the lead in mobile subscribers
44 Index
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Telefonicawatch Report #61 December 2011 Executive Brief
January 4, 2012
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- Telefónica Group performed a U-turn on its long-standing dividend policy, announcing a cut to the payment planned for 2012 just weeks after insisting it was not intending to change its approach to shareholder remuneration for next year. The company also revised its 2011 dividend, cutting the cash element and proposing distribution of treasury shares to make up the shortfall. The decision was said to be a response to the mood of the financial community, which been calling for the telco to move to a more sustainable dividend strategy. However, the sudden, and apparently unexpected, decision left many analysts jumpy, and interpreting the dividend cut as a harbinger of more bad news in 2012. Telefónicawatch considers the decision an overdue acknowledgment of new market realities, and one that could unshackle the telco from financial obligations that were starting to hamper commercial operations. [pp.5-8.]
- Giesecke & Devrient was again highlighted as a Telefónica Digital partner, with confirmation of an agreement that will see the payments technology company provide a Europe-wide NFC platform. This latest agreement follows quickly from a partnership focused on remote management of M2M SIM data, and suggests that G&D is positioning itself as a key partner for the new Telefónica unit. Jasper Wireless is also establishing itself for projects relating to M2M monitoring services, with its partnership with Telefónica linked energy consumption measurements and traffic management solutions. [pp.12, 13, 15.]
- Telefónica Digital is continuing to raise the profile of the work it is undertaking in new sectors, and working to establish itself as a home for innovation. As well as trumpeting cloud computing and M2M capabilities, with a view to expanding business into the automotive and power industries, there is evidence of the division’s intent to deliver new services in 2012. The appointment of Daniel Appelquist, a proponent of closer mobile and internet industry links, as Head of Product Management for BlueVia, looks like another indicator; the former Vodafone man expressed a belief that Telefónica could be implementing changes to ‘big telco’ strategy that have long been needed, but whether Telefónica will be able to maintain momentum needed to move beyond cumbersome traditional telecoms practices remains to be seen. [pp.9, 12, 13.]
- Telefónica agreed a sale and leaseback agreement with American Towers, relating to 2, 500 towers on its Mexican network. The agreement is expected to raise around EUR380m for the operator. [p.23.]
- NEC highlighted its role in testing of LTE services that O2 UK is undertaking in London over the coming months. The vendor flagged use of its iPASOLINK technology in the pilot, which has already been part of O2′s small-scale testing in Slough. NEC is also continuing to build its relationship with Telefónica on cloud computing, with the official launch of new services based on its offerings in Argentina. [pp.20, 31.]
- Telefónica in Spain and Microsoft trumpeted an agreement that will see Imagenio IPTV services made available over the Xbox gaming platform, as the operator looks to defend and expand its presence in the home. Telefónica in Brazil is set to be one of the first operating companies to introduce the collaborative service with Microsoft when an international rollout gets underway. Telefónica is also working with Microsoft on new applications for the vendor’s Windows Phone platform. A team from both companies will work on new developments at Telefónica’s Mobility Competence Centre in Spain. [pp.10, 22, 29.]
- Telecom Italia Chairman, Franco Bernabé, declared himself unworried by an upcoming review of the agreement between the owners of TI holding company, Telco SpA. Telefónica holds an indirect 10% stake in TI, through Telco SpA, but is not expected to take any steps to increase this. Bernabé stressed the benefits that both TI and Telefónica have experienced due to Telefónica’s involvement in Telco SpA, which has seen procurement agreements and joint cost-saving initiatives. [pp.4-5.]
- In the Czech Republic, Telefónica completed trials of NFC-based mobile commerce services with local banks and supermarkets. The pilot was deemed a success, and a rollout in 2012 is predicted. The trial found that most purchases were of low value, but could be completed faster than using traditional payment methods. [pp.16-17.]
- Telefónica is to launch high-profile own-branded handsets and tablets from ZTE in Latin America, under the two companies’ strategic alliance for the region. The Movistar ONE smartphone was set to feature in promotional campaigns at Christmas in countries across the region, while the ONE PAD is seeing a limited launch, with plans for wider availability in 2012, as the telco attempts to establish itself in the burgeoning mobile data sector on the continent. [p.18.]
- The Moviltalk push-to-talk service rollout in Latin America continued, with Venezuela the latest country to promote the two-way radio service. [p.24.]
- The O2 More location-based marketing service is to be launched in the Irish market and it was reported in Spain that there are plans to roll out the service in more countries in the future. O2 UK is said to be establishing a new team to manage the Priority Moments marketing and customer loyalty programme. [p.27.]
- In Spain, Telefónica is continuing to overhaul its tariffs, to counter the decline of its traditional customer base, and is working to encourage the bundling of fixed and mobile broadband. [p.30.]
- Movistar España introduced a new mobile application enabling Apple iPhone users to add a virtual second line to their handset. The service is developed by cloud telephony company fonYou, which is offering the application more widely under its own brand. [p.30.]
- O2 UK introduced a new leasing scheme that enables customers to obtain top-end smart devices without upfront payments, on a twelve-month contract. While the deals include ‘free’ data, minutes, and texts, plus handset insurance, it was noted that costs are not particularly attractive when compared to existing contracts where users are entitled to keep the handset at the end of the arrangement. O2 suggested the leasing model would appeal to customers not wanting to commit to a contract longer than a year. [p.33.]
- O2 Health launched its Side By Side remote medical consultation solution, following trials in Scotland. While tested in remote areas, the telco believes it could be equally beneficial to hospitals in urban areas. [p.35.]
- Supermarket chain Tesco is using wireless network services provided by Telefónica UK to provide free Wi-Fi to customers in its larger stores. Telefónica is hoping to build up a Wi-Fi network across the UK, with a focus on retail partners, as it encourages the adoption of location-based marketing. [p.36.]
- China Unicom is renewing efforts to support mobile internet services, through launch of a new partners alliance and an updated Wo-plus operating system. The operator is seeing success in 3G customer acquisition, and is beginning to close the gap on market leader China Mobile. [pp.38-39.]
Telefonicawatch Report #61 December 2011 Snapshot
January 4, 2012
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Table of Contents
1 Executive brief
4 Telefónica Group
4 Associates and investments
4 Bernabè: Telco SpA critical to Telecom Italia recovery
5 Financial reports
5 Telefónica cuts dividend by 14%-plus, adds scrip element
5 Market reality finally beats Telefónica optimism
6 Dividend review latest harsh dose of reality for Telefónica
6 Asset sales remain on the cards, although new dividend policy eases pressure
7 Analyst reaction — more bad news to come?
8 People
8 People movement highlights
9 Telefónica Digital
9 BlueVia
9 Telefónica poaches Applequist for BlueVia
9 Another statement of intent from Telefónica
9 Research & development
10 Telefónica ties with Microsoft for Windows Phone apps
10 Research & development
12 M2M
12 Telefónica eyes automotive, power industries for M2M
13 Lopez showcases new M2M applications
13 Cloud services
13 Telefónica reassures users over cloud security
14 2e2 on O2 partnership for cloud services
15 Mobile commerce
15 Telefónica ties with G&D for NFC platform
16 Telefónica concludes Czech NFC pilot project
16 Trial demonstrates demand in low-value transactions
17 Other O2 NFC trials set to continue
18 Telefónica Latinoamérica
18 Devices
18 Telefónica to launch Movistar ONE across LatAm
18 ONE PAD to follow in 2012
18 Movistar ONE
20 Argentina
20 Telefónica launches Aplicateca cloud services
20 Movistar launches SMS management service
20 More spectrum needed in Argentina claims Telefónica
21 Brazil
21 Telefónica trumpets Brazil integration, fibre uptake
21 Brazil innovation centre highlighted
21 Vivo sees network capacity boost
21 Colombia
22 Telefónica and Microsoft extend Xbox IPTV deal to Brazil
22 Chile
22 GTD/Entel merger will result in extra competition
22 Ecuador
22 Movistar introduces HSPA+ tariffs
23 Mexico
23 Telefónica sells 2, 500 towers to American Tower
24 Venezuela
24 Moviltalk launched in Venezuela
25 Telefónica Europe
25 Germany
25 O2 falls behind Vodafone and DT on LTE rollout
27 Ireland
27 Telefónica expands O2 More to Ireland
28 O2 trumpets O2 Arena marketing success
28 Czech Republic
29 Spain
29 Telefónica ties with Microsoft for new Xbox services
30 Movistar España continues pricing overhaul
30 fonYou brings second line app to iPhone
31 United Kingdom
31 NEC supports London 4G trials
31 Slovakia
32 Ofcom hints at further 4G rollout delays
33 Telefónica introduces O2 Lease scheme for smartphones
33 “The O2” introduces contactless payments, without O2
35 O2 Health launches Side by Side
35 “The O2” introduces contactless payments, without O2 cont’d
36 Part of a wider e-health push
36 Telefónica backing Tesco Wi-Fi service
36 O2 launches O2 International SIM
37 Telefónica selects Cognizant for online support
37 O2 UK selects Lida for direct marketing
38 Associates and investments
38 China Unicom
38 China Unicom launches renewed mobile internet plan
38 Telefónica relationship highlighted among partners
39 Unicom outperforms rivals in 3G adds
40 Index
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Telefónica trumpets Brazil integration, fibre uptake
January 4, 2012
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As 2011 drew to a close, Telefónica in Brazil highlighted the work in integrating its fixed-line and mobile assets in the country in the wake of the Vivo acquisition in 2010 (Telefónicawatch, #48).
Progress in the year was said to include the completion of a new BRL 400m (EUR165m) data centre supporting fixed and mobile operations, the launch of fixed wireless services outside São Paulo (Telefónicawatch, #59), and discounted mobile broadband prices for fixed-line broadband customers.
It was also noted that Telefónica now has more than 50, 000 fixed-line fibre broadband customers. The fibre customer base is up from 11, 500 at the end of 2010, while the footprint of the fibre network has more than doubled to cover one million businesses and homes over the same period. The company is expecting demand to ramp up substantially in the coming three years, with expectations of a consumer customer base of one million by 2015.
Brazil innovation centre highlighted
Telefónica Brasil noted its innovation centre in the country was working on developments around fibre optics and video services, and had secured patents in relation to gesture-based control of devices such as audio and video equipment, and household appliances including blinds and lighting.
[Further reference: Integração Telefônica/Vivo avança em 2011 com ofertas convergentes e outras sinergias (PDF) -- Telefónica, 6 December 2011.]
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Colombia: Government moves to push through Telefónica merger
December 6, 2011
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Colombian Finance Minister, Juan Carlos Echeverry, said the government will move to liquidate Colombia Telecomunicaciones (Telefónica Telecom), a joint venture between the government and Telefónica, and auction its assets, if the country’s Congress does not approve a $7.5bn (EUR5.6bn) plan to merge the unit with Telefónica’s Movistar unit and substantially recapitalise the new entity.
In practice, a liquidation would almost certainly mean an outright sale of the government’s 48% stake in the joint venture to majority 52% shareholder, Telefónica.
The merger was originally proposed in August 2011 (Telefónicawatch, #58), in response to what Echeverry described as a “financial weakening of the company during recent years”, which could create an “enormous risk” in terms of the company’s ability to meet pension payments and other obligations. The merged entity would be in a position to offer quadruple-play services and better compete in the market, as well as exposing the government to the rapidly growing mobile market, while reducing exposure to the declining fixed-line market.
The proposals involved both parties making substantial additional capital investments, in proportion to their respective stakes in Colombia Telecomunicaciones, as well as paying off debts amounting to $1.9bn.
“ We’re supporting the capitalisation. We’re ready and able to capitalise, but if the government does not see another option than liquidating, we would agree. ”
– Alfonso Gomez, President, Colombia Telecomunicaciones.
Telefónica stressed at its latest results presentation its commitment to the restructuring of operations in Colombia as part of its regional strategy.
[Further reference: Capitalización de Coltel ascendería a $7, 5 billones -- El Universal, 24 November 2011; Colombia liquidation warning to Telefónica -- Global Telecoms Business, 25 November 2011.]
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Telefonicawatch Report #60 November 2011 Executive Brief
December 6, 2011
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- Telefónica Group announced its results for the nine months to the end of September 2011. The telco’s previously hubristic approach to its continued growth and profitability emphasised the gloom as the reality of Spanish woes prompted exceptional costs that led to the company’s first quarterly loss in almost a decade. Headline figures were distorted by exceptional events as the operator grinds gears on the road to transformation, but underlying figures show a mixed picture. Telefónica Europe continues to tough it out in competitive markets, with Germany performing well, and the UK claiming it is prepared for a new charge on the market. However, more traditional sources of good news in Latin America are looking a little deflated, with pressure on Brazil to do the Group’s heavy lifting unabated. [pp.4-7, 24-28, 34-41.]
- Telefónica Digital made a strategic investment in Wi-Fi specialist Quantenna Communications, which develops chipsets aimed at substantially increasing the bandwidth capacity of in-home wireless networks, thereby avoiding future bottlenecks as network operators roll out higher-bandwidth services. The investment comes as Telefónica undertakes a review of its digital services, sparked by the reorganisation of the wider business, which is expected to see the division’s head Matthew Key set out transformation strategy in more detail in early-2012. Telefónica also quietly took full ownership of Spanish WiMAX business Iberbanda. [pp.8, 10.]
- As Telefónica continues to draw attention to its global scale, while it embarks on its transformation strategy, the Group highlighted its relationship with Chinese operator China Unicom. The two companies are to collaborate more closely on developing M2M services supporting the Internet of Things, with a special focus on automotive applications. They are also boosting a strategic alliance on sharing network points of presence to serve multinational corporation customers. José Valles, Head of Telefónica’s BlueVia initiative, also indicated that his company is looking to expand the global developer platform into China, leveraging local support from Huawei. [pp.11, 13, 23.]
- Telefónica took another tentative step towards the introduction of mobile commerce and other NFC-based offerings, as Telefónica Digital and Research In Motion launched a trial of NFC services among a group of 350 Telefónica employees in Madrid, marking a notable shift in focus of such trials towards the handset aspects of the NFC ecosystem. In another M2M development, Telefónica and payments technology company Giesecke & Devrient demonstrated a jointly developed solution for remote management of M2M SIM subscription data, allowing device makers to manufacture devices with cheaper, standardised SIMs that can subsequently be revised throughout the lifetime of the device. Telefónica in Czech Republic launched another O2 Wallet mobile payment trial, this time building on existing schemes ahead of a potential 2012 commercial launch. [pp.14, 16, 18.]
- In Brazil, Telefónica extended its partnership with MasterCard with the formation of a new joint venture to expand their existing Latin American mobile financial solutions alliance to the massive Brazilian market. [p.17.]
- O2 UK launched a trial 4G network in London, involving 25 transmitter sites and more than 1, 000 participants, using a T & D Licence granted by Ofcom, making it the largest urban LTE network in the UK to date. O2 UK’s Chief Executive Ronan Dunne defended the operator’s approach to the 4G spectrum auction process in the UK, while also re-stating reluctance to allow too many concessions to rivals. [pp.47-48, 52-53.]
- Telefónica’s non-compete agreement with Portugal Telecom has come under scrutiny from the European Commission, for an alleged breach of European law. While the clause in the Vivo sale deal that sparked the Commission’s concerns was short-lived, the investigation is also looking at whether the two companies had a longer-term agreement in place affecting competition in their home markets. [p.9.]
- Continuing the development of its Telefónica Global Delivery Network content delivery network platform, Telefónica selected Wowza Media Systems to supply software to offer media-streaming capabilities to a wide range of video-capable devices. Meanwhile, Rafael Arranz, Vice-President of Marketing and Sales at TIWS, said that demand for CDN services is growing among content providers in Latin America. [pp.22-23.]
- Telefónica Latinoamérica signed a strategic partnership agreement with equipment supplier Amper, to jointly target large corporations and government agencies in Latin America with communications, defence, and security solutions. [p.29.]
- The Colombian government underlined its support for a proposed merger between Telefónica’s fixed-line and mobile assets in the country, with Finance Minister Juan Carlos Echeverry threatening to liquidate the government’s stake in the fixed-line venture if the country’s congress fails to approve a recapitalisation plan. [p.31.]
- After a number of delays, and sustained pre-launch activity, Telefónica Latinoamérica launched mobile services in Costa Rica. Key rival Claro, as well as local startup Fullmovil, also launched services at the same time. Movistar Nicaragua announced plans to invest EUR75m to double coverage of its 3G network, mainly in the northern regions of the country, over the next three months. [pp.31, 32.]
- As the dispute over the renewal of licences in Peru continues, local authorities said that the cost would be assessed independently of Telefónica’s current EUR545m tax bill. Meanwhile, Telefónica Chairman Cesar Alierta met with senior government officials about the dispute, heralding a potential settlement of the two parties’ differences. [p.33.]
- In one of two significant disputes with handset manufacturers, Telefónica Czech Republic said it would not list the new Apple iPhone 4S handset and will gradually phase out older Apple models, citing excessively onerous conditions from Apple. In a similar development, O2 UK has been excluded from the list of UK operators selling Nokia Lumia Windows Phone devices, after disagreements over pricing, marketing campaigns, store displays and volume targets, and public criticism of Nokia premium pricing from O2 executives. Telefónica is expected to significantly reduce the portfolio of handsets it offers customers, following a review backed by Telefónica Digital, and is evidently ready to take a more combative approach to vendor relationships. [pp.42, 51.]
- O2 Germany added to its mobile payment options with a new mobile carrier billing deal with Zong, a PayPal-owned mobile payment provider. The German business appears to be leading Group activity on contract billing for new services. [p.43.]
- While Telefónica framed its success in Germany as a by-product of its innovative commercial offerings and customer satisfaction with the quality of its network, O2 Germany was forced to acknowledge a growing number of complaints over network performance, blaming the recent rise in smartphone use as the cause, and promising a comprehensive upgrade by the end of 2011. [pp.42-43.]
- In Ireland, Telefónica launched the O2 Unified Communications IP telephony service, in collaboration with Cisco Systems, mimicking the identically-branded service from Telefónica UK. The company also launched a new ‘cloud based’ online service tool called Blueclick.ie, to help customers manage large mobile handset inventories. [p.44.]
- Telefónica España acquired additional spectrum, as the local authorities distributed blocks that were not successfully allocated at earlier stages of its auction. [p.46.]
- Telefónica in the UK made moves towards a more customer-centric business model, firstly with the launch of an initiative called 1st Edition, which is effectively a beta-testing programme for new O2 services, and the trial of a new system to give customers control over how their personal information can be used in activities such as marketing and financial services. At the same time, the unit set up a new business intelligence team to centrally collate, organise, and analyse customer data collected from its various new services divisions, for the benefit of its marketing and new product development functions. [pp.50, 55.]
- There were rumours that Telefónica Europe may be set to win back a mobile services contract with carmaker BMW thought to have been poached by Vodafone, as O2 Germany and the manufacturer notably trumpeted their joint work on using LTE technology for in-vehicle telemetry services. O2 UK also announced contract wins from BSkyB, to provide corporate mobile services over two years, and with Chargemaster, an electric vehicle recharging equipment manufacturer, to provide M2M technology for the company’s network of charging stations. [pp.14, 43, 50, 54.]
- China Unicom and rival China Telecom are both to face an anti-trust investigation from the country’s National Development and Reform Commission, in relation to activities in the broadband access and inter-network settlement sectors. [p.56.]
- Telecom Italia delivered significantly better-than-expected results for Q3, driven by strong revenue growth in Latin America, and a slowing in the rate of revenue decline in Italy. [p.57.]
Telefonicawatch Report #60 November 2011 Snapshot
December 6, 2011
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Table of Contents
4 Telefónica Group
4 Results 9m/Q3 FY11
4 Group results hit by one-offs; underlying trends worrying
4 Latin America slows as growth engine
4 First loss for nine years as Group prepares ground for new structure
5 Table 1. Telefónica Group, selected financial data, 9m and Q3 FY11
5 Traditional reporting structure to continue until 2012
6 Telefónica losing its swagger, but some cause for cautious optimism
6 Table 2. Telefónica Group, customer numbers (’000), Q3 FY11
6 Telefónica plugs benefits of partner programme
6 Associates have negative impact on Telco valuation
7 Telefónica maintains guidance in tough times
7 Margin targets looking precarious
7 Debt ratios still under threat
7 Results 9m/Q3 FY11
7 Dividend payments becoming a drag on operations
8 People
8 Table 3. People movement highlights
8 Telefónica quietly acquires Iberbanda
9 European regulation
9 Telefónica must justify non-compete agreement with PT
9 Financial
10 Telefónica Digital
10 Associates and investments
10 Telefónica invests in Quantenna
10 “…out of context…”
10 Telefónica on new digital services
11 BlueVia
11 Telefónica to launch BlueVia in China
11 Regional centres
12 Cloud services
12 Telefónica outlines position on ‘cloud’ regulation
12 Wayra
12 Telefónica opens Wayra Academy Madrid
13 M2M
13 Telefónica signs M2M agreement with China Unicom
13 Telefónica ties with Tragsa on agricultural M2M solutions
14 Telefónica ties with G&D for lifetime M2M management
14 O2 Germany and BMW demonstrate in-car LTE
16 Mobile commerce
16 Telefónica and RIM trial contactless payments
16 Telefónica shifting focus to vendor partnerships
17 Telefónica extends MasterCard JV to Brazil
17 Brazil formally brings experience to wider regional initiative
18 O2 Czech Republic to launch new O2 Wallet pilot
19 Strategy
19 Key: operators are becoming “commoditised”
20 Telefónica Global Resources
20 Devices
20 Table 4. Device highlights
22 Content delivery
22 Telefónica selects Wowza for CDN delivery
23 Demand for CDN grows in LatAm
23 TIWS
23 Telefónica to share PoPs with China Unicom
24 Telefónica Latinoamérica
24 Results 9m/Q3 FY11: Latinoamérica
24 Growth engine beginning to run out of steam
24 Table 5. Telefónica Latinoamérica, financial highlights, 9m and Q3 FY11
26 Mobile growth continues but headroom getting limited
26 Contract customers offer profitable potential
26 Pay-TV beginning to take-off for the telco
27 Table 6. Telefónica Latinoamérica, customer numbers (’000), Q3 FY11
27 Brazil favours fixed-wireless over LLU for growth
27 Brazil and Mexico provide the good news and bad news
28 Brazil dominates Latinoamérica performance
28 Table 7. Telefónica Latinoamérica, revenue by country, 9m and Q3 FY11
29 Regional
29 Telefónica ties with Amper in LatAm
29 Argentina
30 Brazil
30 Vivo to expand HSPA+ rollout
30 Telefónica continues to focus on network strengths
30 Telefónica selects Tel-NT for repair services
31 Colombia
31 Government moves to push through Telefónica merger
31 Nicaragua
31 Movistar to invest in network expansion
32 Costa Rica
32 Movistar launches services in Costa Rica
33 Peru
33 Paredes: licence dispute separate from tax debt
33 Alierta: Telefónica will “respect” government decision
34 Telefónica Europe
34 Results 9m/Q3 FY11: España
34 Telefónica finally reacts to harsh market conditions
34 Table 8. Telefónica España, financial highlights, 9m and Q3 FY11
35 New deals helping España reach inflection point
35 Change may not be as fast as impression given by Telefónica
35 Pay-TV continues modest growth
36 Table 9. Telefónica España, customer numbers (’000), Q3 FY11
36 Average revenue dropping in dwindling customer base
36 Table 10. Telefónica España, wireless key performance indicators, Q3 FY10
38 Results 9m/Q3 FY11: Telefónica Europe
38 Europe boosts profits, ups competitiveness
38 Table 11. Telefónica Europe, financial highlights, 9m and Q3 FY11
38 Contract customers account for majority of net adds
38 Tesco Mobile business continues strongly in UK
39 UK attempting to regain momentum
39 Germany confidence boosted by portfolio successes
39 Table 12. Telefónica Europe, revenue and OIBDA by country, 9m and Q3 FY11
39 Ireland on the outside
40 O2 UK better managing mobile broadband growth
40 Germany sees accesses growth across the board
40 Slovakia boosts Czech Republic performance
41 Broadband services struggle in UK
41 Table 13. Telefónica Europe, customer numbers (’000), Q3 FY11
41 Czech Republic
41 O2 establishes Wi-Fi unit as users reach 50, 000
41 O2 CR re-vamps TV offering
42 O2 CR blames Apple’s requirements for iPhone absence
42 Germany
42 Telefónica acknowledges customer network complaints
43 Embarrassing timing, as Telefónica boasts of German smartphone adoption
43 O2 signs carrier billing deal with PayPal’s Zong
43 Telefónica selects Callidus for sales coaching
43 O2 ties with tiramizoo.com for GPS tracking
44 Ireland
44 O2 ties with Cisco for large enterprise cloud service
44 O2 Ireland launches cloud service management
45 Slovakia
45 Slovakia gets new Chief Executive
45 Digital dividend auction penned for early-2012
45 Germany
45 E-Plus open to O2 acquisition
46 Spain
46 Telefónica acquires more 900MHz spectrum
46 Table 14. Summary of Spain’s Long Term Evolution spectrum auction results (second round)
47 Telefónica ties with Metro de Madrid for virtualisation
47 United Kingdom
47 O2 launches trial 4G network in London
48 Use of P2MP technology for backhaul
50 O2 engages customers through “1st Edition”
50 O2 wins BSkyB contract
51 UK spat with Nokia continues; O2 slams Lumia pricing
51 Olive branch from O2 Germany?
52 Dunne clarifies Telefónica’s position on 4G auction
52 Dunne demands “fair and open” auction process
53 Ofcom’s second consultation
53 Dunne still prepared to fight on spectrum if necessary
54 O2 ties with Chargemaster for electric vehicle charging
54 O2 gives customers control of personal information
55 O2 centralises business intelligence
55 O2 needs to be back in the game
56 Associates and investments
56 China Unicom
56 China Unicom faces anti-trust investigation
57 Vendors sign new Unicom deals
57 Telecom Italia
57 Strong LatAm results boost TI
58 Deal rumours circulate around TI
59 Index
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O2’s Wi Fi expansion plans close to reality
October 26, 2011
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Gavin Franks, Managing Director of Telefónica UK’s (O2 UK) Wi-Fi division, said the company is close to signing “several very large deals” to expand its network of Wi-Fi hotspots, from its current level of approximately 500 to around 15, 000.
In January 2011, O2 UK unveiled plans for O2 Wifi, a national network of hotspots that will be available for free to all users, developed through a series of partnerships with strategic venues, such as restaurants, retail outlets, and shops (Telefónicawatch, #52). As well as offering an improved Wi-Fi experience for customers, the company said it will integrate the capabilities of its O2 Media and O2 Money services. At the time, Tim Sefton, New Business Development Director of Telefónica UK, estimated the Wi-Fi network project would take around six months and cost “in the low double-digit millions”.
Franks’ comments appear to imply that, although a little later than originally planned, the project is now taking shape, and has provided additional detail on how the service will look. He said it will offer smartphone users of any network Wi-Fi access via a personalised welcome page with relevant content from the venue owner. From the venue’s point of view, the service will also offer data on store foot traffic, percentage of visitors using smart devices, and the websites that customers access while at the venue, as well as valuable marketing opportunities.
“ We’ve recognised that Wi-Fi has to be free to the end user, and it must add value to the venue where it’s deployed. The venue owners must realise some of the benefits from this, given they’ve been neglected by only receiving a small percentage of the revenue…It’s about using the Wi-Fi data to create value for the venue owner. But the really exciting pieces are the campaigns we’ve been running based upon our O2 Media platform using location services and geo-fencing — leading to a personalised media campaign so that we and the venue owner can connect to the customer. ”
– Franks.
Franks added that, in addition to the possibility of running targeted consumer marketing campaigns using profiling techniques from its O2 Media platform, the service could also integrate with its O2 Money services to transact payments via its m-wallet service.
As further evidence that the company’s Wi-Fi strategy is coming to fruition, it also appointed Ben Mein as its new Head of Commercial Delivery for O2 Wifi, with responsibility for developing commercial strategies, expanding relationships with clients and third parties, and driving overall financial growth, as well as leading the sales team. Mein joins from The Nielsen Company, where he served as Director for Online and Media Business. He also previously worked at News International, leading the Digital Strategy team.
Claims of data offloading miss O2 strategy focus
Franks was keen to emphasise that the business model is driven by marketing and establishing strong partnerships with venues, rather than data offload to take pressure of the company’s 3G network. Telefónicawatch considers that the executive’s statement ties in with the mobile operator’s shift in emphasis towards becoming a platform for delivering end users to corporate customers and content providers; but there were still media suggestions that the telco is building the Wi-Fi network to alleviate congestion problems.
“ We’re not installing access points as an alternative to our 3G network; and we don’t want to follow the model of Wi-Fi being used for traffic offload. ”
– Franks.
Some industry watchers have been cynical about its focus on marketing and market differentiation being behind the wider move towards Wi-Fi, insisting that data offload is the real motivation behind the moves. Thomas Wehmeier, an Analyst at Informa Telecoms & Media, for example, emphasised the degree to which data offload has come to the fore over the past six-to-twelve months, and said that “any self-respecting network director should be looking to include Wi-Fi as part of a more holistic network strategy”. Kelly Davis-Felner, Marketing Director of the Wi-Fi Alliance, meanwhile, stated that she believes operators are only interested in using Wi-Fi for data offload.
Luis Serrano, Senior Vice-President for Boingo Wireless, a retail and wholesale Wi-Fi service provider, took the view that the publicly stated approach is less important than the ultimate effect of the strategy.
“ They need to expand their footprint, and Wi-Fi does indoor coverage very well. I don’t know if the O2 Wifi economics will work, but I don’t think it matters. It’s all about retaining customers by providing good coverage and connectivity. ”
– Serrano.
Speaking at the time of the switch-on of Telefónica UK’s 3G 900MHz (3G 900) spectrum in London (Telefónicawatch, #53), Nigel Purdy, Chief Technology Officer at Telefónica UK, stated that the company’s “strategy is to intelligently layer our network to give our customers connection to 2G, 3G, HSPA+, LTE, and Wi-Fi, seamlessly, simply, and at speed”, implying that Wi-Fi is very much an integral part of the company’s strategy to deliver sufficient capacity to customers across all network types, even if it wants to specifically avoid using the term “data offload”.
Telefónicawatch considers that the claims of data offloading overlook the longer term goal of Telefónica Group in using its customer relationships to build a business as a trusted partner between content and service providers, and its end-user customers.
The plans for O2 Wifi, while no doubt having some benefit in terms of alleviating network pressure, look to be more focused on delivering useable information to retailers on potential customers, and building on programmes such as O2 More location-based advertising and the O2 Priority rewards programme.
[Further reference: European operators embrace Wi-Fi offloading with a hint of caution -- FierceWireless, 28 September 2011; O2 Wifi aiming to rapidly increase wireless broadband footprint -- Cable.co.uk, 4 October 2011; Ben Mein joins O2 Wifi as commercial delivery chief -- Mobile Magazine, 3 October 2011.]
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