Telefonicawatch Report #59 October 2011 Executive Brief

October 26, 2011

Telefonicawatch Report #59

Covering: October 2011
Published: 10-12 times a year
Next report: November 2011
Pages: 46
From this report:

About Telefonicawatch:

  1. Telefónica appeared wary of European Union interest in encouraging fibre infrastructure investment through regulation that could cut into profitability of legacy copper networks. The telco recently reiterated belief that it should be the beneficiary of its own network investment, although resources for capital expenditure look restricted by other financial pressures — as noted by Fitch Ratings as it downgraded its outlook for the company. [pp.4-5.]
  2. Telefónica in Spain was highlighted as a partner testing new DSL technology from Alcatel-Lucent, which promises to boost broadband connection speeds to 100Mbps without installation of fibre-to-the-premises. The Spanish operator is expected to be an early customer of the new technology, building on other recent announcements that have seen it turn to the France-based vendor for next-generation access solutions. [p.21.]
  3. In the UK, O2 has begun trials of an over-the-top service offering text messaging and VoIP calls over Wi-Fi networks. The move appears a tentative first step into a new approach to service delivery from the operator, and actual evidence that the operator has recognised that the status quo cannot be maintained. [p.9.]
  4. Movistar España made a new service available, enabling mobile applications to be accessed and managed across a range of devices. The app store idea is built on a platform announced by the telco at the Mobile World Congress earlier in 2011, and is expected to spread across the Group, and to units of associate Telecom Italia. [p.27.]
  5. In Brazil, Vivo launched what it claimed to be the first service enabled by its merger with Telefónica’s fixed-line business in the country, with new fixed-line services expanded beyond the São Paulo region that forms the Telesp home market. [pp.36-38.]
  6. The Wayra start-up accelerator and incubator programme is expected to launch in O2 markets in the near future, with the new Telefónica Europe Chief Executive, José-María Álvarez-Pallete, keen to spread the idea he has championed since its Latin American launch. Faster adoption of the new business development idea is an example of Telefónica’s recent management changes taking effect. Another indicator of changes prompted by the Group management restructure was the appointment of Shaun Gregory, who has been leading the UK’s mobile advertising effort for O2, to a Group-level role tackling advertising internationally. Mobile advertising, alongside the other six new vertical markets targeted by the telco, is expected to generate EUR1bn of revenue within five years. [pp.7, 13, 17.]
  7. Vivo provided more information on its planned credit card offering, which is seen as a gateway into mobile payment services. A loyalty scheme run with partner Santander is expected to appeal to customers that are not currently established credit card users. O2 Money in Ireland has attracted 50, 000 paying customers since launch, with its pre-paid debit card being principally used for online purchases — perhaps reflecting the spending habits of its young target demographic. [pp.7-8.]
  8. Research business Telefónica I+D entered a strategic partnership with augmented reality specialist Layar, developing visual search services. The agreement will see Telefónica license its patented inventions — an area of innovation the telco is keen to spotlight, and profit from. [pp.10, 12.]
  9. The O2 Wifi service is set to launch soon in the UK, with the operator emphasising its potential to nurture location-based services. The concept of using a Wi-Fi network to support Telefónica’s growth as a platform for value-added services ties in with digital transformation goals, although many observers considered it more a means of alleviating growing pressure on 3G networks. [pp.15-16.]
  10. Telefónica said a major new data processing centre is to be built in Spain. The telco flagged the efficiency and security of the new centre, and identified it as a key element of plans for delivering cloud services and infrastructure outsourcing to its major customers around the world. [p.18.]
  11. Swiss telco Sunrise was the latest named participant in the Telefónica Partners Program. The two companies are expected to pool resources on procurement service and provision, and to look at other collaboration opportunities. [p.22.]
  12. Telefónica International Wholesale Services is to provide network connectivity in Latin America to Easynet Global Services, a UK-based service provider looking to expand its international presence. TIWS also worked with the Spanish Telefónica unit to boost the international network capacity within its home market, deploying new interfaces that will take total interconnection capacity to 1.2Tbps in 2011, and 1.8Tbps in 2012. [p.23.]
  13. In the Czech Republic, O2 is embroiled in legal action with a mobile virtual network operator re-selling O2 services under what the Telefónica unit considers to be false pretences. Undeterred, the MVNO is said to be planning to expand its service to Slovakia, also using O2 infrastructure. [p.24.]
  14. Practical steps to integrate the fixed and mobile assets owned by Telefónica in Germany continue, with the deployment of new Oracle solutions expected to improve the unit’s ability to bundle services and offer more effective customer support. [p.26.]
  15. JDSU was awarded a contract to provide proactive monitoring and repairs for the Movistar Imagenio IPTV platform. [p.28.]
  16. The UK regulator Ofcom is to re-consult on its plans for the spectrum auction needed to enable the launch of 4G services in the UK market, adding six months to the timeframe for the planned auction. While the regulator appeared confident this need not affect commercial launch dates, the continued jostling of the UK operators, with O2 leading the way with mutterings of legal action, suggests a longer wait should be anticipated. [pp.31-32.]
  17. While Telefónica units across Europe announced plans for the new Apple iPhone 4S, as well as compensation for RIM BlackBerry users affected by recent outages, the telco was said to have fallen out with Nokia over an upcoming Windows Mobile device launch in the UK. The vendor is thought to believe the O2 business is not sufficiently supportive of the release. [pp.19, 33, 34.]
  18. Telefónica in Argentina launched a new IT Consultant service, offering SMEs hardware and connectivity advice, and ongoing support. The Argentinian unit is also supporting international expansion plans for confectioner Arcor. [p.34.]
  19. Telefónica is expected expand pay-TV activities in the Brazilian market, following an increase in its stake in TV operator TVA. Vivo is also planning network expansion in the north of the country, as Telefónica responds to intensifying competition in the country, and works to maintain impressive growth. [pp.35-36.]
  20. Telefónica in Colombia is participating in bidding for a tender to deploy a national fibre-optic network. [p.39.]
  21. Telecom Italia is to spend EUR1.3bn on 800MHz spectrum in its home market, although the spectrum, set to be used for LTE services, is not expected to become available until 2013. [p.40.]

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Telefonicawatch Report #59 October 2011 Snapshot

October 26, 2011

Telefonicawatch Report #59

Covering: October 2011
Published: 10-12 times a year
Next report: November 2011
Pages: 46
From this report:

About Telefonicawatch:

Table of Contents

1 Executive brief

4 Telefónica Group
4 Financial
4 Fitch downgrades Telefónica, cites cash squeeze
5 Network
5 Telcos wary of tougher EU copper regulation plans
5 Telefónica already facing pressure on investment
5 Acquisitions and disposals
5 Corporate social responsibility
6 People
6 People movement highlights
6 Corporate social responsibility
6 Executives

7 Telefónica Digital

7 Gregory to take on global role
7 Mobile commerce
7 O2 Money reaches 50, 000 users in Ireland
7 Management restructure
7 Marketing
8 Vivo details Santander credit card
8 Mobile payment trials with Banco Itaú
8 M-commerce
8 Visa in talks on NFC partnership
8 Partners
9 OTT services
9 O2 tentatively embraces VoIP
9 Signs that Telefónica is bowing to the inevitable
9 BlueVia
10 Telefónica I+D
10 Telefónica ties with Layar for visual search
10 Could AR replace barcodes?
10 Research
10 Telefónica hosts HomeGrid event
12 I+D stresses value of patents
12 Jariego: Future direction for Telefónica I+D
12 Role of Telefónica I+D
12 Terra
12 Terra TV continues expansion
13 New verticals expected to generate EUR7bn in five years
13 Partnerships emphasised as I+D aims to remain flexible
13 Tuenti
13 Tuenti builds base; ponders international expansion
14 Partnership with Huawei
14 Threat from Google acknowledged
15 Wireless networks
15 O2′s Wi-Fi expansion plans close to reality
16 Claims of data offloading miss O2 strategy focus
17 Wayra
17 Wayra set to come to O2

18 Telefónica Global Resources

18 Data centres
18 Telefónica plans major new data centre in Spain
19 Devices
19 Device launch highlights
21 Networks
21 Telefónica testing Alcatel-Lucent 100Mbps DSL boost
22 Partners
22 Sunrise enters Partners Program
23 TIWS
23 TIWS wins MPLS contract from Easynet
23 Telefónica expands international network capacity

24 Telefónica Europe

24 Czech Republic
24 O2 fights with grey operator
25 Germany
25 Telefónica implements Oracle solution
25 Telefónica continuing to push integration forward
26 Operators cleared to use 800MHz in four more states
26 O2 Germany overhauls data tariffs
27 Spain
27 Telefónica’s My mstore launched
27 Telefónica trumpets rural access improvements
28 Telefónica dips toes in content production again
28 Echoes of Endemol, but investment is a legal requirement
28 Telefónica picks JDSU for IPTV management
28 Slovakia
29 Mobile TV subscriptions fall dramatically in Q2
31 United Kingdom
31 Ofcom delays 4G auction in face of operator complaints
32 Telefónica succeeds in securing review, but could see a pyrrhic victory
32 3 UK claims rivals encouraging 4G auction delay
33 O2 spat with Nokia over Windows Phone devices

34 Telefónica Latinoamérica

34 Regional developments
34 Telefónica businesses respond to BlackBerry problems
34 Argentina
34 New IT Consultant service launched by Telefónica
34 Telefónica provides centralised centre for Grupo Arcor
35 Brazil
35 Telefónica to expand pay-TV; ups stake in TVA
36 Vivo trumpets integration with new fixed-line services
36 A timely launch as competition intensifies
36 Vivo launches mobile group purchasing service
36 Ecuador
38 Vivo commits to network expansion in Amazonas
38 Cielo named as Vivo mobile recharge partner
38 Peru
38 Venezuela
39 Colombia
39 Telefónica consortium in fibre bid

40 Associates and investments

40 Telecom Italia
40 TIM to shell out EUR1.26bn on spectrum boost
40 Spectrum wait necessary
40 Expectations well beaten
40 China Unicom
41 TI instigates partner programme
41 TI terminates supply contract with TI Media
42 TI could increase investment in Argentina
42 TI continues cloud development with Avaya

43 Index
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Telefonicawatch Report #58 September 2011 Snapshot

October 19, 2011

Telefonicawatch Report #58

Covering: September 2011
Published: 10-12 times a year
Next report: October 2011
Pages: 48
From this report:

About Telefonicawatch:

Table of Contents

1 Executive brief

4 Telefónica Group
4 Operations
4 Telefónica details new management structure
4 Telefónica Digital management team draws senior Europe figures
5 Global Resources demonstrates wide remit
5 Competitors
5 Corporate social responsibility
6 Telefónica Europe management sees subtle shifts
6 Corporate social responsibility
6 Financial reports
7 Telefónica Latinoamérica solidifies support roles
7 Dividend cut predicted for Telefónica
8 Sector reacts to Telefónica re-org
8 Global Resources seen as aping Vodafone, Digital leading way
8 Digital division about alliances as well as competition
8 “…out of context…”
8 Telefónica re-org reaction
9 Perception of Madrid devolving power misplaced
9 Strategy

10 Telefónica Digital

10 Advertising solutions
10 O2 More boasts six million customers
10 Wayra
11 BlueVia
11 BlueVia targets Silicon Valley
11 Innovation
11 Telefónica claims progress for Innova project
13 M2M
13 Telefónica ties with Masternaut for telematics
14 Linares emphasises commitment to digital at Santander

15 Telefónica Global Resources

15 Devices
16 Networks
16 Telefónica launches CDN platform
16 O2CR and O2 Germany tie for network management

17 Telefónica Europe

17 Czech Republic
17 O2 continues to expand 3G network
18 Digital dividend sell-off tabled for 2012 — report
19 Germany
19 O2 discounts LTE for home as rural DSL alternative
19 LTE leading new wave of fixed-mobile substitution?
19 O2 stores to accept old handsets
20 Ireland
20 Hanway succeeds Shurrock as CEO of Telefónica Ireland
20 Spain
20 Gilperez steps into España role
20 Teixeira moves up ranks in Brazil
22 Telefónica to launch pre-commercial LTE service
22 Alcatel-Lucent supplies network
22 LTE competition from Orange and Vodafone
22 Slovakia
23 Longer term LTE plans
23 Ansaldo outlines investment in last speech for España
24 CMT shows Movistar still struggling, and shedding share
24 Broadband accesses dip sequentially, but fibre grows
25 Fixed-line continues decline
25 Telefónica cuts prices, but denies entering price war
26 Limited offer restricts risk to revenue
26 Telefónica claims of no price war look hollow
27 CMT to review Telefónica charges
27 Hints that mobile competition could intensify
28 Telefónica selects Redknee for pricing analysis
28 Spain following Ireland’s lead
29 United Kingdom
29 Jacada wins new O2 contract
29 O2 UK opens new store, including O2 Workshop
30 Concerns reappear that UK spectrum auction on slide
30 UK
32 3 seeks to derail mobile commerce alliance
32 O2 trumpets success of dual-screen marketing campaign
33 O2 signs Outsourcery as JUC partner

34 Telefónica Latinoamérica

34 Regional
34 Telefónica sold customer data to Santander
34 Competitors
35 Álvarez-Pallete on Latin America
36 Argentina
36 Telefónica launches UC offering
36 Telefónica making strides in corporate sector
36 Movistar launches content management platform
37 Movistar deploys Mublet solution
37 Telefónica claims 3m internet customers
37 Brazil
37 Vivo launches mobile top-up
38 Colombia
38 Colombian operations may merge
39 Ecuador
39 Government to award additional spectrum in short term
39 Costa Rica
40 Peru
40 Licence renewal dispute continues
42 Movistar and Nokia take “green” drive to Peru
42 Venezuela

43 Associates and investments

43 China Unicom
43 China Unicom extends MPS partnership with Trunkbow
44 Telecom Italia
44 No new entrant via ‘digital dividend’ sale
44 TIM Brasil invests in network to challenge Vivo
45 AES Atimus acquisition clears another hurdle

46 Index
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Telefonicawatch Report #58 September 2011 Executive Brief

October 19, 2011

Telefonicawatch Report #58

Covering: September 2011
Published: 10-12 times a year
Next report: October 2011
Pages: 48
From this report:

About Telefonicawatch:

  1. Telefónica Group confirmed a second tier of management for its new restructured global organisation, with the new Telefónica Digital business drawing heavily on Telefónica Europe executives, as well as including personnel from Latin America and Spain. Suggestions in the media of a significant shift in control of the telco away from Madrid appear somewhat exaggerated, however. Álvarez-Pallete, new head of Telefónica Europe, is joined by another senior Telefónica Latinoamérica executive, Luis Miguel Gilperez, the new Telefónica España Chief Executive. Gilperez is credited with leading much of the integration work of Telefónica’s operations in Brazil, following the 2010 Vivo deal — skills that may be drawn upon as the Group melds its European OpCos into a single division. Spanish press reports hinted at the priorities of the expanded division, with claims that Álvarez-Pallete will be focusing on raising margins at the Group’s O2 operations. Overall, reaction to Telefónica’s decision to transform its management organisation was positive, with little to change Telefónicawatch‘s initial assessment. Hopes for the future appear to rest on Telefónica Digital, while Global Resources and Telefónica Europe will be pressed to improve efficiency in order to defend declining traditional business. [pp.4-9, 20.]
  2. Telefónica Group launched a new content delivery network platform, the Telefónica Global Delivery Network, which is to provide high-capacity transport for content and service provider customers internationally. The platform initially launched in Argentina and Spain, with plans to roll out in Brazil, Colombia, Chile, Mexico, and Venezuela in Latin America, and Germany and the UK in Europe. [p.16.]
  3. In Europe, Telefónica’s continued efforts to integrate operations, now being championed by Telefónica Global Resources, have prompted a joint project between Telefónica in the Czech Republic and Germany on network management. The initiative will see monitoring of fixed-line networks in Germany managed in the Czech Republic, while Telefónica Germany will manage Czech and Slovak mobile networks alongside its own. [p.16.]
  4. Telefónica España trumped rivals with the announcement of a pre-commercial LTE service to be offered to large corporate customers in major hubs across the country. The service is to be built on Alcatel-Lucent technology and, by 2012, is expected to be offering 100Mbps download speeds. While there are no compatible handsets yet available for the service, the telco is offering high-speed connections for data cards to customers signing for a EUR45-per-month mobile internet tariff. The announcement prompted similar service launches from the telco’s competitors. [pp.22-23.]
  5. In Colombia, there are signs that the fixed-line and mobile operations of Telefónica may be more closely integrated. The country’s government is still a significant shareholder in the fixed-line business, and a merging of interests would entail significant capital investment by both parties, but substantially strengthen the telco’s product portfolio. There would also be potential for Telefónica to make better use of tax credits relating to its struggling fixed-line business in the country. [p.38.]
  6. Senior figures from BlueVia, Telefónica Digital’s applications platform, toured technology hubs in the USA, on a mission to inform IT and developer communities about the capabilities of the Telefónica platform, and global scale of the business. During the event, BlueVia presented alongside partners including Amobee, Boku, and Microsoft. [p.11.]
  7. Telefónica in Chile held a month-long promotional event to support its Innova entrepreneurship and innovation programme, which is being positioned as a possible model for innovation across the Group. The similar, but newer, Wayra accelerator and incubator programme, held calls for start-up ideas in Argentina and Peru that closed in September 2011, with Brazil, Chile, Ecuador, and Venezuela expected to look for investment targets before the year is out. [p.10, 11.]
  8. Telefónica signed an agreement with Masternaut to jointly develop and market telematics-enabled fleet management services, as part of Telefónica Digital’s drive to build a market for M2M services. [p.13.]
  9. Julio Linares gave a speech trumpeting the importance of new digital technologies to build on the European Community’s plans for widespread high-speed broadband coverage across the continent within the next five-to-eight years. As the Group was implementing its reorganisation, the Chief Operating Officer heralded technologies that fall under the remit of Telefónica Digital — underlining questions as to the role of the Telefónica Group number-two executive in the revised management team. [p.14.]
  10. O2 Media, the UK-based mobile advertising unit, claimed to have boosted its customer base from 2.5 million to more than six million in around three months, on the way to a year-end goal of ten million users of the opt-in advertising solution, which is an important element of Telefónica Digital plans. Efforts to create an industry-wide open platform for mobile commerce in the UK are being hampered slightly by protests from non-participant Hutchison 3 UK, which is claiming it has been deliberately excluded, and pointing the finger at O2 UK as being chiefly responsible for this state of affairs. [pp.10, 32.]
  11. Telefónica Czech Republic is continuing its 3G network rollout, which has now reached 61% of the population. Rolling out 4G services is still some way off, however, with auctions of digital dividend spectrum apparently delayed further into 2012. The UK is facing similar delays, with signs that the regulator’s schedule for auctions will be thrown off by discussions with the operators on the fairness of the proposed auction. [pp.17, 18, 30.]
  12. In Germany, more progress is being made on LTE services, with the operator promoting its 4G coverage as an alternative to fixed-line broadband offerings — reflecting a trend building across the continent. [p.19.]
  13. Tony Hanway was named as the new Chief Executive of Telefónica Ireland when Stephen Shurrock, after less than a year in the position, moved to a new role in Telefónica Digital. [p.20.]
  14. In Spain, regulator the CMT published market statistics showing Telefónica had shed more than two percentage points of market share for both broadband and mobile services in the past year, which could explain the decision by Movistar España to offer a heavily discounted broadband connection to customers maintaining an active mobile account with the company. Despite the ongoing price-cutting promotional efforts, senior Telefónica executives claimed unconvincingly that the market is not seeing a price war. [pp.24-26.]
  15. Redknee, a software development company, won a contract to provide Telefónica in Spain with pricing-analysis solutions to sit on the telco’s billing platform. The deal builds on an earlier agreement between Redknee and Telefónica in Ireland. Jacada saw its customer service software deployed at Telefónica in the UK. [pp.28, 29.]
  16. Telefónica in Argentina launched a new Unified Communications suite offering hosted IP communications solutions in partnership with Siemens Enterprise Communications. The Argentinian operator also launched a new mobile platform to support subscription management for customers, and to promote content. [p.36.]
  17. Paulo Cesar Teixeira was named as the new Chief Executive of Telefónica in Brazil. The former Vivo executive had recently been charged with managing Consumer operations for the integrated Brazilian telco. [p.20.]
  18. A network licence dispute in Peru is continuing, with the government looking to establish an independent valuation for the Telefónica licence up for renewal. In Ecuador, short-term licences are to be awarded to address spectrum shortages, ahead of longer term auction plans. In Venezuela, authorities have halted Telefónica plans to implement new price rises, claiming it is acting unfairly. The telco insists it has upheld the terms of its licence. [pp.39-40.]
  19. Telefónica and Nokia’s partnership promoting “eco” handsets spread to Peru, after earlier launch in Spain. [p.42.]
  20. China Unicom is continuing to develop mobile payment platforms in the local emerging market with an agreement with Trunkbow. In Italy, Telecom Italia is among the four participants in the country’s 4G spectrum auctions. The Italian incumbent is also upping its investment in fixed-line networks in Brazil, enhancing its competitive position in the country. [pp.43-45.]

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Sector reacts to Telefónica re-org

October 19, 2011

Telefonicawatch Report #58

Covering: September 2011
Published: 10-12 times a year
Next report: October 2011
Pages: 48
From this report:

About Telefonicawatch:

There was considerable coverage of Telefónica Group’s decision to reorganise its structure to tackle a decline in its traditional businesses, and to foster growth (Telefónicawatch, #57).

The moves were widely welcomed, although the strategy was interpreted differently across the stakeholder community.

Global Resources seen as aping Vodafone, Digital leading way

The creation of a Telefónica Global Resources was described as “better late than never, ” by analysts, and it was noted that Telefónica rival Vodafone has operated a similar division for several years.

However, it remains unclear to Telefónicawatch the extent to which the new division will offer additional benefits compared to those provided by the existing Global Services business, which had seen centralising of many functions, and has been in operation since 2009 (Telefónicawatch, 2009.05).

In contrast, the Telefónica Digital division was seen as more ground-breaking. It was noted after the Telefónica announcement on the new Digital division that Vodafone had opened a research and development centre in Silicon Valley, highlighting its pursuit of innovation (and originally reported in Vodafonewatch in 2010). The moves by the mobile giants were cited as evidence of a change in mood and attitude at the large European players, which has actually been evident for some time.

The Telefónica move was described in the Guardian as “far more daring” than Vodafone’s innovation and incubator launch, due to the role Matthew Key will play in running the programme — the presence of a perceived rising star with substantial senior management experience is seen to give the Telefónica Digital division gravitas.

Digital division about alliances as well as competition

Elsewhere, the understanding of the purpose of Telefónica Digital appears to have been focused solely on innovation and new product development, when a significant aspect of the role will be in its partnering with companies. When Telefónica announced its intention to work with players in areas where it could not effectively compete, the emphasis should have been seen to be on the cooperating aspect of the declaration. Telefónica management had been making some noises about cooperating more with internet giants, and while there appeared to be some resistance in practice to partnership, the Telefónica strategy as set out at its Investors Conference in April 2011 (Telefónicawatch, #54) assumed an increased level of partnership in the pursuit of new business.

Perception of Madrid devolving power misplaced

It was noted that the reaction in Spain seemed subdued following the news of Telefónica’s reorganisation, considering that it saw its home division vanish. However, this could be due to interpretation of events — there was an assumption made in the UK press that the creation of the Telefónica Digital division with its nominal headquarters in London, combined with the folding of Telefónica España into a European business that principally comprises O2 units, implied a shift in power from Madrid.

This view is unrealistic. Senior management are to remain in Spain; the running of European operations is in reality moving closer to the Spanish capital than London, and closer control of O2 businesses can be perhaps expected. The theory that Madrid is taking more of a role in the activities of O2 operating units could be seen to be supported by the apparent changes in strategy in recent quarters from Telefónica UK (O2 UK). Telefónicawatch has regularly noted that generating more profit from existing customers appears to have taken priority over the focus on strong performance through innovation, which had been the hallmark of the O2 business in the period that saw it grow to be the largest player in the market (before the Orange and T-Mobile merger). “Value not volume” is the mantra that emerged from Telefónica España as that business suffered in the markets, and it is now being taken up by Telefónica Europe. It was noted in the Spanish press that the introduction of Alvarez-Pallette to the leadership of Telefónica Europe is expected to support a programme to raise margins at the O2 businesses.

Telefónica Digital certainly appears to have been given a degree of independence to try and build new revenue streams, but it could also be seen as being left to ‘sink or swim’. Several reports indicated that Telefónica Digital’s 2, 500 staff will be based in London, but this appears to be far from the case. However, it is an impression the Group seems unworried about correcting, particularly in the UK environment. Telefónica already appears coy on the number of staff it employs in innovation centres across Latin America, Spain, and the UK, but it is unlikely that operations are set to up sticks and move to the UK any time soon.

Senior Group management are drawing the core businesses closer into their control, and having more involvement in the running of operations. The changes in structure could actually represent the opposite of Madrid trying to diversify its business, but instead represent a company panicking about its future and trying to counter this by taking a firmer grip.

[Further reference: Alierta da otro golpe de timón en Telefónica -- Cinco Dias, 5 September 2011; Spanish locals stay calm about global Telefónica -- Financial Times, 7 September 2011; Telefónica answers the call of London's attractions -- Financial Times, 7 September 2011; Vodafone flies flag for Britain in Silicon Valley -- Guardian, 9 September 2011; The Promise and Perils of Telefónica Digital -- Yankee Group, 6 September 2011.]
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Telefonicawatch Report #56 June-July 2011 Executive Brief

July 28, 2011

Telefonicawatch Report #56

Covering: June-July 2011
Published: 10-12 times a year
Next report: August 2011
Pages: 64
From this report:

About Telefonicawatch:

  1. Telefónica Group named Bouygues Telecom and Etisalat as the first members of a new Partners Program. As well as commitments to collaborating on research and development, sharing technology, and supporting the provision of roaming services to multinational corporation customers, Telefónica indicated the telcos will team on procurement of equipment and wholesale network access. The stepping-up of partnering efforts to exploit international scale reflects Telefónica’s ambitions to grow as a global player, without over-committing to risky acquisitions. The telco also reiterated its ties with IT vendor Microsoft through a new alliance, fuelled by ambitions to collaborate more in the corporate sector. [pp.9-11.]
  2. Telefónica is moving forward with its drive to exploit innovation and emerging digital services as the basis for development of a business providing “services beyond connectivity”. The Wayra start-up accelerator programme held events in Colombia, Mexico, and Spain, identifying 30 business ideas for investment and hands-on support. There were signs of commercial interest in the telco’s application development platform BlueVia, and its potential for delivering applications built using revenue-sharing deals for access to the telco’s APIs. Developer AlwaysOnMessage is to launch a suite of text-based versions of smartphone applications, which will be targeted at the broader base of feature phones in markets across Europe and Latin America. Telefónica’s intentions for evolving new services in areas including cloud-based services, corporate productivity, and e-health were trumpeted at a prelude event ahead of the 2011 Movilforum. Microsoft and Nokia demonstrated the progress made on their nascent partnership at the Telefónica event. [pp.6, 14, 17-18.]
  3. Telco SpA, the Telecom Italia holding company in which Telefónica is a key shareholder, announced another write-down on the value of its controlling stake in the Italian incumbent. After the EUR1.2bn hit to the balance sheet, Telco still values TI shares at around twice the market rate, and Telefónica appears to have limited room to manoeuvre with regard to its beleaguered partner. Ongoing claimed synergies provide something of a silver lining. [pp.4-5.]
  4. Telefónica Group is said to be working with Deutsche Telekom, France Télécom, Telecom Italia, and Vodafone Group on a universal logo for NFC mobile commerce services. When deployed, this is expected to support consumer awareness and understanding of where and how mobile payment services are available. The move is another indication that operators in Europe are working harder to ensure they have a key role in digital payments. The mobile commerce collaboration between O2 UK and its national rivals has been well received by advertisers, although with some caveats regarding a possible lack of competition. In Latin America, Telefónica is continuing to make strides in mobile banking, with a new partnership with the IT division of Bankinter to build a cloud financial services platform. The operator is ensuring the services it offers financial institutions via the platform are open to all regional telco customers, reaffirming the division’s commitment, previously evidenced by its plans to work with MasterCard across the continent, to ensure its services are open and accessible to the widest possible market. [pp.8, 30-31, 48.]
  5. Telefónica Multinational Services claimed successes with two new contracts, usurping Deutsche Telekom to win a contract with Daimler in Germany, and an extension of an existing deal with Grupo Antolin in Spain. Progress in building a converged network services business in the multinational corporation sector appears modest, however, with the bulk of work still focused on mobile services delivery. [p.16.]
  6. Telefónica España reached an agreement with the Spanish telecoms unions on job cuts and pay rates for the coming three years. 6, 500 jobs are to be lost, with the telco contributing towards benefit and pension costs for departing staff. The pay deal will see a performance-based element added to the criteria for pay increases, shifting away from cost-of-living linkage. The telco will book a EUR2.7bn-plus-taxes charge as a non-recurring cost in relation to the deal, but insists the measures will be cash positive for from year-one. [p.21.]
  7. Telefónica España announced new Movistar mobile broadband tariffs, reportedly boosting data caps and enabling single accounts to be used for a range of phones, smart devices, and tablet PCs, and, for the first time, permitting the use of P2P and VoIP on some offerings. The new deals intensified competition in a market already heating up with a price war. The operator could see a further threat from mid-2012, when switching mobile service provider will be simplified for consumers, and the timeframe for transfer reduced from four days to just one. [pp.22-23.]
  8. Telefónica España deployed networking solutions from F5 Networks, expected to streamline infrastructure and address challenges presented by growing demand for mobile applications; while Juniper Networks and Telefónica I+D claimed success for optical multilayer network architecture trials, which are expected to influence how networks manage traffic in the future. Cabling solutions from Radio Frequency Systems, intended to save space taken up by network equipment and support delivery of 3G in congested urban areas, were also trialled by the Spanish business. [pp.24, 26, 28.]
  9. Telefónica was linked to an agreement that could see it provide pay-TV and video-on-demand services via the Microsoft Xbox gaming console. [p.28.]
  10. Demand for paid value-added services in Latin America was described as strong by Telefónica executives in the region, although the need for operators to put their own stamp on services to foster loyalty was also stressed. [pp.31-32.]
  11. The head of Telefónica Latinoamérica’s satellite broadcast services warned that demand for satellite TV offerings was putting pressure on capacity, and predicted that the region will increasingly see broadband services delivered using satellite technology. [p.33.]
  12. Ericsson was awarded a managed services contract, to provide field support services for Telefónica’s network infrastructure in São Paulo, Brazil. [p.36.]
  13. Vivo increased its market-leading share in the Brazilian mobile market, with particular strength in the contract and mobile data sectors. The operator also launched a new push-to-talk service, to compete with existing two-way radio offerings. [pp.34, 35.]
  14. Telefónica’s Brazilian fixed-line business is to participate in the roll out of a government-backed national broadband programme, and will make wholesale offerings available to start-up ISPs to foster innovation in the market. [p.36.]
  15. In Chile, Telsur is set to launch the country’s first MVNO using Movistar network assets, increasing competition in the market. In Mexico, federal authorities are said to be looking at pushing incumbent Telmex’s prices up to encourage competition, which could benefit number-two player Movistar. [pp.37, 39.]
  16. Movistar Mexico has ambitious plans to boost the number of users of mobile internet among its customer base from 150, 000 to one million in 2011. In Colombia, the local Telefónica unit is also introducing low-cost daily access to basic mobile internet services to drive growth. [pp.37, 39.]
  17. After just six months in the role, Trevor Healy left his post as Telefónica Europe Chief Innovation Officer, to take charge of mobile advertising company (and Telefónica strategic investment) Amobee. [p.41.]
  18. Telefónica Germany re-launched its Alice TV IPTV offering, although growing its small customer base may be a challenge as bigger rivals begin to focus on delivering more innovative new services. [p.42.]
  19. Telefónica Germany set up an independent business to handle its hosting and cloud services operations for corporate customers, marking something of a reversal of its integration strategy. [p.43.]
  20. Telefónica UK unveiled its new Priority Moments marketing service, which is expected to address the operator’s twin goals of engendering customer loyalty, and providing an attractive platform and engaged potential customer base to its advertising partners. The O2 business also highlighted, through its work with health club chain Fitness First, the potential for mobile advertising to generate measurable revenue, with additional prospects of creating long-term relationships. The company is hoping to dramatically build the opted-in customer base for its advertising services. [pp.45-47, 55.]
  21. Telefónica in the UK expressed intention to undertake trials of fibre-based, fixed-line broadband services by the end of the year, although details of the services, or any partners, were sketchy. [p.49.]
  22. Telefónica UK signed a five-year EUR11m contract with Datapoint for the vendor to provide new contact centre solutions linking Telefónica’s UK centres, with aspirations to use the partnership to explore the potential of new channels for customers to interact with the telco, including instant messaging and social media, and possibly to extend services across the Telefónica European footprint. Telefónica España also launched a new customer support service, using the Facebook social-networking platform, as the Group looks to extend the scope of its customer service efforts. [pp.19, 53.]
  23. China Unicom is hoping to accelerate 3G adoption, as it pursues ambitious 2011 customer targets with the introduction of lower cost smart devices. Telecom Italia is bolstering its Brazilian operations through acquisition of fibre backbone network provider AES Atimus for EUR700m, and signature of vendor agreements valued at EUR450m to improve its capacity and performance. [pp.56-60.]

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Telefónica and Bankinter link for financial cloud platform

July 28, 2011

Telefonicawatch Report #56

Covering: June-July 2011
Published: 10-12 times a year
Next report: August 2011
Pages: 64
From this report:

About Telefonicawatch:

Telefónica and Bankinter link for financial cloud platform

Telefónica Group signed a collaboration agreement with Gneis, the IT unit of Spanish bank Bankinter, to jointly develop and test a new cloud-based platform for financial institutions in Latin America.

The platform will enable Latin American financial institutions to offer customers mobile banking services, and act as the basis for the development of new products and specific functionalities. It is envisaged that the platform will create the potential for new commercial channels for banks, providing customers with “always open” access to their accounts.

Services will be offered to financial institutions under a pay-per-use model to minimise the need for banks to invest up front. The cloud-based nature of the offering means that banks will also be able to offer access to all their customers, regardless of their mobile service provider.

The two companies stressed that the agreement goes beyond technology, offering financial institutions in Latin America the chance to share experience and knowledge of deploying mobile financial services.

This solution will help financial institutions to grow their business with new products and to serve a larger number of customers via mobile channels. It is also expected to save costs with greater efficiency in distribution and operation, and to provide new security features for services.

The two companies will initially collaborate on small-scale customer trials of the platform, before a commercial launch across Telefónica’s entire Latin American footprint.

Continued momentum for mobile financial services in LatAm

The partnership with the Bankinter subsidiary in Latin America is another step towards Telefónica Latinoamérica building a business offering mobile financial services across the region. It is notable that the telco is working to deliver services that are not tied too closely to its own retail mobile network operations in the region — for example, the partnership with MasterCard on mobile payments and financial services is intended to be made available across operators and banking groups and not just Movistar (Telefonicawatch, #52) .

In Europe, mobile financial services models are currently struggling with territorial battles, with operators and banks apparently focusing more on their own retail markets rather than creating a wider ecosystem. While there are clear signs that players are moving on from this isolated approach, as evidenced by recent plans for collaboration on standards by UK operators including Telefónica UK (Telefónicawatch, #55), and wider work by the major European players in areas such as branding (see separate report), it would appear that Telefónica is taking a lead in the emerging Latin America market in creating an enabling business that is closer to a wholesale model.

[Further reference: Telefónica y Bankinter se unen para impulsar una plataforma en la 'nube' de servicios de movilidad para entidades financieras en América Latina.-- Bankinter, 27 June 2011.]
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Telefonicawatch Report #56 June-July 2011 Snapshot

July 28, 2011

Telefonicawatch Report #56

Covering: June-July 2011
Published: 10-12 times a year
Next report: August 2011
Pages: 64
From this report:

About Telefonicawatch:

Table of Contents

1 Executive brief

4 Telefónica Group

4 Associates and investments
4 Telco writes down value of TI stake
5 Telefónica saddled with ongoing problems from inflated TI price
6 BlueVia
6 BlueVia used to bring apps to feature phones
6 BlueVia API openness shows signs of fulfilling goals
6 Community
6 Verdantix names Telefónica as energy‑efficiency “leader”
7 Devices
7 Device highlights
7 Financial reports
8 NFC
8 Operators to collaborate on new NFC logo
8 A symbol of the wider cooperation needed for NFC
8 Financial reports
9 Partners
9 Bouygues Telecom joins Telefónica Partners Program
9 Telefónica building on previous experience
9 An alternative to acquisitions in straitened circumstances
10 Etisalat signs Telefónica alliance, joins Partners Program
10 Telefónica ties with Microsoft for unified comms
10 Marketing
11 Companies active in building partnership in recent months
12 Regulation
12 New EC rules on roaming imminent, caps in place
12 New framework pushes rates down further, aims to open market
13 Final voice caps for 2014 also outlined
13 Telefónica questions need for caps
14 Strategy
14 Telefónica hosts “Corporate Mobility” day
14 Nokia and Microsoft give collaboration efforts an outing
16 Telefónica Multinational Solutions
16 Telefónica wins Daimler contract
16 Telefónica renews Grupo Antolin contract
17 Wayra
17 Wayra project gathers steam, in LatAm and Spain
17 Three pillars of programme discussed
18 Telefónica continues to seek start‑up flexibility to match telco strengths

19 Telefónica España

19 Digital services
19 Movistar launches Facebook customer support
19 Contracts
20 Networks
20 Second phase of Spanish spectrum auction begins
20 European ‘digital dividend’ auctions
20 Corporate social responsibility
21 Operations
21 Telefónica agrees job cuts, pay deal
21 Telefónica secures Spanish pay certainty
22 Products and services
22 Telefónica accepts VoIP on new mobile broadband tariffs
22 Rivals respond rapidly again
22 Community
23 Acceptance of VoIP the shape of things to come?
23 Regulatory
23 24‑hour portability coming to Spain
24 Research and development
24 Telefónica and Juniper improve network flexibility
25 Strategy
25 Telefónica praised in KAR report
25 Telecoms media still enamoured with incumbent
25 Internet and social‑networking opinions
26 Suppliers
26 Telefónica deploys F5 solutions
26 Telefónica partners Bradford Networks
26 Wireless networks
28 RFS claims success for Telefónica trials
28 Television services
28 Telefónica linked to Xbox for TV deal
28 Television services
29 Broadband TV trial underway

30 Telefónica Latinoamérica

30 Mobile commerce
30 Telefónica and Bankinter link for financial cloud platform
30 Regional
31 Continued momentum for mobile financial services in LatAm
31 Regional developments
31 Telefónica executives see healthy demand for VAS
31 Vivo sees innovation paying dividends
32 Applications drive data subscriptions
32 Movistar: operator portal experience key to VAS success
33 MNLA: satellite TV under pressure, b’band demand to rise
33 Satellite to become major broadband delivery platform
34 Argentina
34 Telefónica begins corporate service push
34 Brazil
34 Vivo builds market share, strength in data
35 Vivo extends push‑to‑talk services
36 Telefónica commits to national broadband scheme
36 New fixed‑line voice commitments made
36 Ericsson wins Telefónica managed services deal
37 Chile
37 Movistar signs MVNO deal with GTD/Telsur
37 Colombia
37 Telefónica sees little impact from labour action plan
37 Chile
37 Ecuador
38 Costa Rica
38 Telefónica cleared to enter Costa Rica
38 Peru
39 Mexico
39 Movistar launches ambitious new mobile internet plans
39 FTC indicates more regulation on Telmex
39 Venezuela
39 Signs blocks on repatriating Movistar funds are easing
39 Mexico

41 Telefónica Europe

41 Executives
41 Telefónica loses Innovation head
41 Czech Republic
42 Germany
42 Telefónica re‑launches Alice TV
42 Under‑developed market offers opportunities, but major rivals in the way
43 Telefónica sets up hosting unit
43 Element of strategy reversal in shift towards independence
44 Telefónica promotes smartphones
44 Telefónica highlights sustainability gains and benefits
44 Fonic launches JAJAH service?
44 Slovakia
45 United Kingdom
45 O2 launches Priority Moments
45 Slovakia
45 Ireland
46 A service for customers, or advertisers?
47 O2 Media highlights Fitness First campaign success
47 Fitness firm a mobile ad pioneer; service driving substantial spend
48 O2 claims significant interest in m‑commerce platform
48 Ad industry hopeful but wary of lack of competition
49 O2 UK to trial fibre services
49 Fujitsu project may offer long‑term option
50 Giffgaff head outlines business model
51 Forums already proving worth in larger players
51 O2 Health sees opportunity in NHS reforms
52 Shift of focus to consumers, but professionals still priority
52 La Senza adds fixed line to mobile contract
52 Giffgaff used to foil O2 rival ad claims
53 Telefónica signs contact centre contract with Datapoint
53 Scope for expansion of technology and geographic scope
55 O2 targets massive ad opt‑in spike

56 Associates and investments

56 China Unicom
56 Unicom falls behind China Telecom in 3G net adds
56 Unicom leading in 3G network infrastructure
56 2G customer base still growing; wireline declines
57 Low‑cost 3G handset launches
57 NSN wins Unicom network deal
57 Sina agrees VAS deal with Unicom
58 Telecom Italia
58 TIM acquires AES Atimus for EUR700m
59 TIM Brasil signs BRL 1bn vendor deals
59 Telecom Italia selects Incard MUSE platform
60 Telecom Italia partners SAP on cloud services

61 Index
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Telefonicawatch Report #55 May-June 2011 Executive Brief

July 7, 2011

Telefonicawatch Report #55

Covering: May-June 2011
Published: 10-12 times a year
Next report: July 2011
Pages: 66
From this report:

About Telefonicawatch:

  1. Telefónica announced, and subsequently cancelled, an initial public offering for its call centre business Atento. After lukewarm interest in the available 51% stake, prices were dropped, and efforts to bolster interest were redoubled with US investors, but the Group ultimately decided against progressing further with the sell-off. While the wider macro-economic conditions were blamed for the lack of interest, it was also noted that investors may have been wary of a business so dependent on Telefónica for revenue, and with limited geographic spread. The decision to pull the IPO was generally considered wise, but questions were asked as to why the telco had tried to conduct the sale in the first place. [pp.4-5.]
  2. In Spain, Movistar announced a new mobile tariff, offering calls at substantially lower rates with a reduced monthly spend requirement. • The move by the market leader sparked a rapid response from major rivals and the emerging MVNO market, and many reports of a price war in the Spanish market. The decision to aggressively drop prices by Movistar marks a u-turn on the operator’s earlier position — Telefónica leadership had previously maintained that price reductions from rivals were irrational and unsustainable. While being responsive to market conditions is commendable, the move may unnecessarily accelerate downward pressure on the division’s margins. • The broadband sector is also showing signs of falling prices, as competitors become more established. [pp.16-19.]
  3. O2 UK trumpeted a joint venture with local rivals Everything Everywhere and Vodafone UK to build an open platform for mobile commerce aimed at jump-starting the mobile payment sector in the country, and providing an opportunity for operators to keep up with the evolving mobile advertising sector. The O2 unit also announced the partners for its upcoming refresh of O2 Money mobile wallet, with Visa named as a network provider, and FIS, Intelligent Environments, and Wavecrest also participating. [pp.45-48.]
  4. Telefónica Group acquired Acens Technologies, a Spanish cloud computing specialist in a deal rumoured to be worth EUR80m. The company is building its cloud services offering from a core market in Spain, and the acquisition looks set to deliver services to the SME sector. It is unclear how the deal will sit with Telefónica’s domestic strategic alliance with NEC to deliver cloud offerings to the same market. [p.14.]
  5. In Argentina, Telefónica and NEC’s partnership on cloud computing services is set to take off. Future collaborations are anticipated next in Brazil and Chile, as part of the two companies’ alliance. NEC is aiming to grow the revenue it generates in the region from $500m to $5bn over seven years. [p.31.]
  6. In a Market Mettle interview, Arvind Rao, Chief Executive of OnMobile, discussed his company’s relationship with Telefónica, which has seen the vendor’s value-added services deployed across a footprint covering 85% of Telefónica’s customers in Latin America. Rao considers the Group’s degree of central control as a positive, enabling action to be taken rapidly. [pp.23-26.]
  7. Siemens Enterprise Communications and Telefónica Latinoamérica signed a cooperation agreement that will see them offer unified communications services to large corporations and public sector organisations across the region. The regional Telefónica division also awarded UK solutions provider Cellcrypt a contract to provide call encryption products for Movistar smartphone users. • Solutions provider XIUS trumpeted expansion of its agreement with Telefónica in Latin America, and claimed that its re-charge services are being used to drive adoption of mobile payments on the continent. [pp.29-30.]
  8. In Spain, the early stages of 4G spectrum auctions got underway, with the main sell-off due to start imminently. • In the UK, Telefónica raised objections to the regulator’s plans for similar spectrum auctions. Should network provider grumblings over the proposed auction model escalate to legal objections, distribution of valuable bandwidth could yet again be postponed. [pp.20,50-53.]
  9. Telefónica Multinational Solutions announced a multi-million euro contract with G4S, a security solutions provider, to deliver a network and telecommunications platform. [p.8.]
  10. Telefónica Group was named as a founding member of the Open Visual Communications Consortium, established by Polycom to support interoperability of teleconferencing services. The telco also agreed an interoperability agreement with Orange Business Services for telepresence conferencing. [p.9.]
  11. Telefónica continues to see political fallout over plans for substantial job cuts in its Spanish business, although agreement with unions appears to be inching closer. While the telco is attempting to link concessions on redundancies to revised remuneration terms for remaining staff, it was claimed that axing 20% of its posts could cost EUR2.6bn. The Spanish business re-focused its management, with new regional heads and a centralised Business Development unit. [pp.11-13.]
  12. Telefónica in Spain launched an e-reader hoped to rival the Amazon Kindle. In the future, it is expected to be rolled out to other markets on the Telefónica footprint. [p.21.]
  13. Movistar España announced integration of its Segunda Linea service, which provides an additional IP telephony number for mobile customers, with social-networking site Facebook, enabling users to manage voicemail, send web texts, and manage their account from the site. • O2 in the UK is also offering new services within Facebook, with prepay customers able to top-up their accounts without leaving the platform. [pp.21-22,48.]
  14. The Spanish government and country’s telecoms regulator are supporting Telefónica’s appeal of the EUR152m fine imposed by the European Union in 2007 for restricting competition. [p.16.]
  15. Telefónica España entered a strategic agreement with broadcaster Mediaset to test hybrid broadcast broadband television, with content from Mediaset included in applications for the Imagenio portal. [p.22.]
  16. Telefónica in Argentina opened a new innovation centre with national academic institutions. • In Chile, another centre for innovation is due to open soon, to support an incubator programme. [pp.32,34.]
  17. Integration of Telefónica’s fixed-line and mobile assets in Brazil intensified, as the last of the official merger steps were completed. Senior management changes were confirmed, and the business split into consumer- and business-oriented divisions. The company is to spend nearly EUR90m on rolling out a fibre-to-the-premises network in São Paulo during 2011. [pp.32-33.]
  18. Telefónica’s main rival in Mexico, Carlos Slim’s Telcel and Telmex businesses, are facing heightened regulatory resistance to their market dominance, providing Telefónica with an opportunity to build its position in the market. [pp.35-36.]
  19. A new music streaming service for Movistar customers was launched in Peru, offering fixed-line and mobile broadband access to customised playlists on the platform. Telefónica hopes to have ten million customers across Latin America using the streaming service by the end of 2011. [p.36.]
  20. O2 Germany commercially launched its LTE network with new products, targeting both consumers and businesses. • 3G services were launched in Slovakia, while, in the Czech Republic, O2 claimed it had re-taken the lead in 3G rollout, after rival Vodafone appeared to have expanded its footprint beyond 50% of the population. [pp.38,39,44.]
  21. Huawei and Telefónica Germany are to open a collaborative Service Innovation Centre to develop new services. [p.41.]
  22. MicroNova, a German provider of network management solutions, won a contract to provide planning services for the German O2 network. [p.43.]
  23. O2 Ireland is to offer business customers Microsoft Office 365, a cloud-based version of the Microsoft Office desktop suite, as the Telefónica and Microsoft commercial relationship continues to build. • A fixed-line business broadband offering was launched in the UK. [pp.44,49.]
  24. The Chinese National Audit Office is looking into alleged irregularities in the financial statements of a group of state-owned enterprises, including China Unicom. Elsewhere, the Chinese operator recently awarded regional contracts to Alcatel-Lucent, Huawei, and NSN. • Telecom Italia entered a five-year research and development partnership with Huawei. The Italian incumbent is also looking at further acquisitions in Brazil, but cast doubt on the potential de-listing of its TI Media division ahead of a rumoured sale. [pp.58-59,60-61.]

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Telefónica to acquire hosting company Acens

July 7, 2011

Telefonicawatch Report #55

Covering: May-June 2011
Published: 10-12 times a year
Next report: July 2011
Pages: 66
From this report:

About Telefonicawatch:

Telefónica Group announced an agreement with Nazca Capital to acquire Acens Technologies, a Spain based cloud computing specialist.

Financial details were not disclosed, but El Economista reported that the telco paid between EUR75m and EUR80m, citing sources close to the negotiations.

Acens specialises in hosting and providing telecommunications solutions for small and medium size enterprises (SME), and self employed professionals, via its two data centres in Barcelona and Madrid, and presence in Bilbao and Valencia. Current Acens operations focus on domain registrations, virtual private network solutions, web hosting, and other internet service outsourcing functions. The company employs around 180 staff and has a client portfolio of more than 100,000 companies.

El Economista said Telefónica intends to use the acquisition to support plans to consolidate in excess of 100 data centres worldwide into six, of which two will be located in Europe, and two in Latin America, with an investment of up to EUR1.5bn.

Telefónica itself said the purchase will significantly increase its ability to offer cloud computing and hosting services in the SME segment.

“ This acquisition will demonstrate our commitment to cloud computing and will improve our portfolio of services in the SME segment, complementing our value proposition with respect to the competitive environment. ”
– Guillermo Ansaldo, Chairman, Telefónica España.

The existing Acens management team is expected to remain in place after the acquisition.

Nazca acquired its 91% stake in the company for EUR41.5m in 2007. Talks on the acquisition were said to have run for more than six months, with the outcome considered uncertain at several points.

Impact on NEC relationship unclear

It is not clear how the acquisition will tie in or affect Telefónica’s partnership with NEC, which is delivering cloud computing services in partnership with the telco, and claiming significant success with the partnership (Telefónicawatch, #54).

NEC has previously stated it is hosting some cloud services on behalf of Telefónica, while larger enterprise customers may be hosted at Telefónica’s own data centres. The vendor acts as an aggregator of applications and services that are delivered to customers by Telefónica, with the telco maintaining the customer relationship.

Cloud computing is one of seven key verticals being targeted by Telefónica as part of its drive to build services beyond connectivity; and the Spanish market is leading efforts in this area, with a view to expansion across the entire Group (Telefónicawatch, #54).

[Further reference: Telefónica signs agreement to purchase Acens, a leading hosting services provider for SMEs in Spain -- Telefónica, 7 June 2011; Telefónica prepara la compra de Acens por cerca de 80 millones de euros -- El Economista, 7 June 2011; Telefónica compra la empresa de hosting Acens a precio de saldo: un 50% menos de lo previsto -- Cotizalia.com, June 2011; Telefónica ultima la compra de Acens por unos 80 millones -- Cinco Dias, 7 June 2011; Telefónica cierra la compra de la tecnológica Acens -- Cinco Dias, 7 June 2011.]

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