Telefonicawatch Report #55 May-June 2011 Executive Brief
7 July 2011
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- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- Telefónica Multinational Solutions announced a multi-million euro contract with G4S, a security solutions provider, to deliver a network and telecommunications platform. [p.8.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- 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.]
- Huawei and Telefónica Germany are to open a collaborative Service Innovation Centre to develop new services. [p.41.]
- MicroNova, a German provider of network management solutions, won a contract to provide planning services for the German O2 network. [p.43.]
- 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.]
- 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.]
About Telefonicawatch
Report: #55
Covering: May-June 2011
Published: June 2011
Next report: July 2011
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