Telefónica Group is continuing to develop its Telxius global infrastructure unit with the addition of new assets in Germany and official changes to the value of its capital. The new unit, which may be partially listed in summer 2016, has been created to improve internal efficiency and accounting, while also providing a Plan B debt reduction option, followoing collapse of the sale of Telefónica UK (see separate report).

Telefónica Group revealed in a regulatory filing that it is to increase the capital of its newly created Telxius global infrastructure unit from EUR60, 000 to EUR87.56m.

In addition, on 21 April 2016, Telefónica Deutschland signed a contract agreeing the sale of around 2, 350 mobile towers to Telxius for a cash purchase price of EUR537m. It stated in a note to investors that the towers were located mainly in rural areas, and account for less than 10% of the OpCo’s targeted passive infrastructure portfolio. It further indicated that there were no plans for further disposals from its remaining estate, which is mostly made up of roof-top sites.

Telefónica said the move takes advantage of “current favourable market conditions” for infrastructure assets, with the proceeds from the transaction to be used for reinvestment in infrastructure and development of new growth areas, as well as enhancing financial flexibility.

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Infrastructure unit grows

Telefónica created Telxius in February 2016 to bring together infrastructure assets worldwide, such as data centres, mobile towers, and submarine cables (Telefónicawatch, #104). The company initially held around 15, 000 mobile towers (mostly located in Spain) as well as an international network of 31, 000km of submarine fibre-optic cable, including the 25, 000km SAm-1 submarine cable network that links North and South America.

Subsequently transferred into the new company were tower assets from Brazilian (1, 655 towers for BRL 760m/EUR182m), Chilean (328 towers for CLP 7, 853m/EUR10.2m) and Peruvian (900 towers for an unknown price) OpCos. Also included is a project to build a new 11, 000km submarine cable link between Brazil, Puerto Rico, and the USA, to be known as BRUSA (Telefónicawatch, #105). Telefónica added at the time that assets from other Latin American countries would be added in the “coming days” (Telefónicawatch, #105). The Group also previously stated it would incorporate third-party assets, including a number of startups, into Telxius’s portfolio “over the coming months” (Telefónicawatch, #104), with the aim of increasing services to other operators, improving return on capital, and participating more actively in opportunities for growth in the sector.

Revelation of the capital increase also saw Telefónica confirm previously mooted plans for an initial public offering, which may see the company listed as soon as 1 July 2016. The telco is understood to be hoping to achieve an initial valuation of around EUR5bn, to be boosted by new assets added in the future.

Telxius could have achieved EUR680m revenue in 2015

Separately, Telefónica stated that Telxius would have achieved revenue of EUR680m in 2015, if all assets already transferred (or about to be transferred) had been incorporated into Telxius since 1 January 2015. The unit would have achieved earnings before interest, taxation, depreciation, and amortisation (EBITDA) of EUR300m, representing an EBITDA margin of 45%, compared with a margin of 31.3% for Telefónica Group as a whole.

The operator pointed out that Telxius has a “fairly balanced, low-risk” portfolio, with 15% of its assets in Latin America, and 85% in Spain and Germany. Telefónica Chief Financial Officer Angel Vilá added that Telxius is particularly attractive to investors due to its high profitability, long-term contracts with Telefónica, and solid conversion of income to cash.

Image: Campus Party Brasil by Cristiano Sant’Anna/indicefoto

Table of Contents

3 Executive brief
5 Telefónica Group
6 Acquisitions and disposals
8 Financial
9 Legal
11 Management update
14 People
16 Global Resources
17 Telefónica Business Solutions
18 Infrastructure
20 Networks
21 Partners
23 Digital services
24 M2M
25 Security
26 Open Future
26 Big data
29 Latin America
30 Argenti-na
31 Brazil
35 Colombia
35 Ecuador
35 Chile
36 Mexi-co
37 Nicaragua
37 Peru
39 Venezuela
41 Europe
42 Spain
43 Germany
46 United King-dom
49 Further reading
53 Index

Index

Symbols

21st Century Fox
Sky plc 8, 9

A

Al Jazeera 9
América Móvil 31, 36, 37, 44
Claro 31, 37
Apigee 45
Apple
iOS 25, 38
AT&T 36

B

Banco Bilbao Vizcaya Argentaria 8
Barclays 8
Belgacom 17
Bharti Airtel 44
BigML 27
Bouygues Telecom 14
BT Group 8

C

CaixaBank 8
Catalyst Fund 27
Check Point 25
CIENA 21
CK Hutchison 6, 12, 47
H3G
UK 6, 46
CNMC 44
Cofetel (Mexico) 36
Cogent Communications 17
Commissao de Valores Mobiliarios (Brazil) 32
Competition Commission 6
Vestager, Margrethe 6
Conatel 39
Consumers’ Association
Which? 46
Cyan 21

D

Deloitte 43
Deutsche Bank 14
Deutsche Telekom 17
T-Mobile 44
Digitel 39

E

Ericsson 25, 36, 45
Ernst & Young 43
Etisalat 44
European Union 6, 12, 44, 45, 47
European Commission 6, 11, 17, 45, 47
– European Parliament 45

F

Facebook 31
WhatsApp 31
FireEye 25

G

G4S 24
Gemalto 20, 45
Giesecke & Devrient 45
Gilat Satellite Networks Ltd 37
Google
Android 25, 38
Grupo Santander
Santander 8
GSM Association (GSMA) 35, 44, 45
Mobile World Congress 20, 35, 44

H

Honda 38
Huawei 42

I

Intel 21
International Monetary Fund (IMF) 9, 39

J

Juniper Networks 42

K

Kaspersky Lab 25
KPMG 43

L

Liberty Global 8, 30
Virgin Media 7, 8

M

McAfee 47
Mediaset 9
Mediaset Premium 9
Microsoft 25, 47
Office 365 47
Mozilla Foundation 45
Firefox 45
– Firefox Hello 45
MVNOs 6, 7, 46, 47

N

NEC 33
Netcracker 33
Netflix 9, 26, 35
New Venture Partners 46
NII Holdings, Inc. 31
Nokia 42
Alcatel-Lucent Submarine Networks 19

O

Oberthur Technologies 20
Omnicom Group, Inc.
Organic 11
Opérateur des Réseaux Gaz & Électricite 24
Orange 17, 44
Orizonia 14

P

PricewaterhouseCoopers 43

Q

Qualcomm 35
Qustodio 25

R

Red Hat 21
Regions
APAC
China 37, 44
EMEA
Belgium 24
– – Europe 6, 8, 9, 11, 12, 17, 19, 24, 26, 30, 41, 44, 45, 47
– – Finland 44
– – France 14, 20, 24
– – Germany 8, 12, 18, 24, 25, 26, 43
– – Israel 25, 30, 37
– – Italy 9, 39
– – Liechtenstein 47
– – Norway 47
– – Poland 44
– – Spain 8, 9, 11, 13, 14, 18, 20, 25, 26, 35, 36, 39, 42, 43, 44, 45
– – Switzerland 14, 47
– – UK 6, 8, 12, 24, 25, 46, 47
Latin America 9, 11, 12, 18, 29, 30, 33, 37, 39
Argentina 25, 30, 31, 35, 44
– – Brazil 12, 13, 14, 18, 19, 25, 31, 33, 35, 37, 39, 44
– – Central America 9
– – Chile 18, 25, 26, 30, 35, 37
– – Colombia 35, 37, 39, 44
– – Costa Rica 35
– – Ecuador 35, 44
– – El Salvador 35
– – Guatemala 35
– – Mexico 12, 25, 36, 39, 44
– – Nicaragua 35, 37
– – Panama 35
– – Peru 18, 26, 35, 37, 38, 39, 44
– – Uruguay 35, 44
– – Venezuela 26, 35, 37, 39
North America
USA 18, 19, 25, 30, 39
Repsol 14
Rhapsody International
Napster 43

S

Sabadell 14
Securities Exchange Commission (SEC) 14
Siemens 14
Smart Meter Implementation Programme (UK) 24
Société Générale 8
Spotify 26

T

TalkTalk plc 8
Technologies
2G 47
– 3G 36, 46, 47
– 4G
LTE 17, 31, 32, 36, 39, 46, 47
ADSL 13
– Broadband 19, 31, 35, 36, 37
– Business/Operations Support Systems (BSS/OSS) 33
– eSIM 20
– Ethernet 17
– GPS 38
– GSM 35, 44
– Internet of Things 24, 26, 31
– IP 17, 42, 45
– IPTV 35
– Linux 21
– M2M 12, 13, 24, 38
– Network functions virtualisation (NFV) 21
– NFC 20
– OpenStack 21
– SIM 20, 24, 43, 44, 47
– Smart metering 24, 25, 33
– SMS 38
– Software defined networking (SDN) 21, 42
– Telematics 38
– TV 9, 13, 30, 37, 46
– WCDMA 36
Telecom Italia
TIM Brasil 31
Telefónica Group 5, 6, 8, 9, 11, 12, 13, 14, 17, 18, 25, 30, 35, 43
Advisors
Rato, Rodrigo 9
Associates and investments
GesConsultor 25
– – Mediaset Premium 9
– – O2 Czech Republic 20
Digital services
ElevenPaths 25
– – M2M 12, 13, 24, 38
– – Open Future 26, 27
– – OTT 45
– – Telefónica I+D 27
– – Tu 45
– – Wayra 26
Directors
Cirac, Ignacio 14
– – de Paz, Javier 14
Echenique, Javier 14
Fluxá, Sabina 14
– – Löscher, Peter 14
Europe
E-Plus 12
– – Germany 43
– – Giffgaff 46
– – O2 6, 7, 8, 11, 12, 43, 46, 47
– – Spain 9, 11, 12, 13, 20, 38, 42, 43, 44, 45
– – Telefónica Deutschland 18, 20, 24, 33, 43
– – UK 6, 8, 9, 11, 12, 18, 24, 33, 44, 46, 47
Executives
Alierta, César 11
– – Álvarez-Pallete Lopez, José María 11, 12, 13
– – Darriet, Franck 14
– – Dowd, Ben 46
– – Flores, Carlos 37
– – Genish, Amos 31
– – Gilpérez, Luis Miguel 43
– – Gutiérrez, Javier 42
– – Juan Waehner 30
– – Moral, Mariano 36
– – Moreno, Juan Miguel 21
– – Pérez, Pedro Pablo 25
– – Perrin, Anne 24
– – Valbuena, Santiago 14
– – Vilá, Ángel 11
Fundación Telefónica 35
– Global Resources
BRUSA 18, 19
– – Managed Mobility 21
– – Telefónica Business Solutions 14, 17, 21, 24, 36
– – Telefónica Global Resources France 14
– – Telefónica Global Solutions 14
– – Telefónica International Wholesale Services 37
– – Telefónica Multinational Solutions 14
– – Telxius 18
Latin America
Argentina 30
– – Brazil 14, 25, 31, 32, 33
– – Chile 14, 20, 35
– – Ecuador 35
– – Mexico 14, 36
– – Peru 37
– – Telefé 30
– – Telefónica Grandes Empresas 38
– – Vivo 31, 32, 33
Products and services
Fusión 11, 42
– – Movistar Play 35
– – pay-TV 8, 9, 13, 30, 31, 35
– – SealSign 45
– – SmartID 45
– – SmartM2M 24, 25
– – Smart Meter Connect 24
Telefónica Studios
Telefé 30
Telemar
Oi 31
Telenor 44
TeliaSonera 17
Tesco 7, 46, 47
Tesco Mobile 7, 46, 47
Time Warner 30
CNN 30
Trianel 24

V

Vasona Networks 46
VCCP 46
Virgin Group 7, 8
Vivendi SA 9
Vivo Participações
Edington, Christiane 33
Vodafone Group 6, 44, 46
UK 44, 46
VTR 30

W

World Bank 36
International Centre for Settlement of Investment Disputes 36

X

Xinwei Telecom Enterprise Group 37

Y

Yamaha 38
Yandex Data Factory 26

Z

Zabel Group

About

About Telefonicawatch

Report: #106
Covering: April 2016
Published: May 2016
Next report: June 2016
For more information visit: Telefonicawatch