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Telefonicawatch, issue 2008.06 snapshot

8 August 2008

Q2/H1 FY08 RESULTS: Unlike some rivals, Telefónica’s second-quarter and half-year results were well received, with the Group delivering solid numbers, well versed in calming investors’ sector-wide jitters, and reiterating full-year outlook. Despite unhelpful exchange rate movements, Latinoamérica remained the engine of growth, with España achieving growth in a tough market (contrasting with Vodafone’s much-publicised local weakness), as Europe (O2) managed to tread water in the face of tough competition and further exchange rate challenges. Across the Group, fixed-broadband and pay-TV supported mobile operations as notable drivers of growth. The Group continues to profess “limited M&A ambitions“, and a prioritisation of shareholder returns. [pp.5-37.]

Issue: 2008.06
Covering: 10 July to 5 August 2008
Published: August 2008
Next issue: September 2008

Delivering valuable insight into the labyrinth that is Spain’s global telco giant. A unique monthly report for the industry.

SUMMARY

GROUP: Carlos Blanco, head of Telefónica Internacional, made clear his opposition to a European Commission review of termination rates. Apple’s new iPhone 3G was launched with much fanfare, great expectations, but limited supply, in Ireland, Spain, and the UK. A framework agreement was signed allowing mobile OpCos to adopt Google Maps. [pp.4,38,39,56,57,59.]

Q2/H1 FY08 RESULTS: Unlike some rivals, Telefónica’s second-quarter and half-year results were well received, with the Group delivering solid numbers, well versed in calming investors’ sector-wide jitters, and reiterating full-year outlook. Despite unhelpful exchange rate movements, Latinoamérica remained the engine of growth, with España achieving growth in a tough market (contrasting with Vodafone’s much-publicised local weakness), as Europe (O2) managed to tread water in the face of tough competition and further exchange rate challenges. Across the Group, fixed-broadband and pay-TV supported mobile operations as notable drivers of growth. The Group continues to profess “limited M&A ambitions“, and a prioritisation of shareholder returns. [pp.5-37.]

ESPAÑA: Guillermo Ansaldo outlined a seven-point plan for growth in H2, including revenue stimulus from Yoigo, wireless data, the iPhone, the public sector, USF revision, and fibre investment. However, he also conceded that Orange Spain and Jazztel are seeing success with ‘naked’ and fully unbundled offers, helping fuel decline in the fixed-line estate. Wireless data currently seems relatively undeveloped, with just 300,000 3G modem customers. [pp.14-20.]

Telefónica España is partnering the Chamber of Commerce to promote adoption of ICT among SMEs. The CMT appeared to smile on Telefónica, with the regulator relaxing fixed-line rules and deciding not to force sharing of the new fibre network. However, customers may gain strength from a new “bill of rights” covering billing, number-portability, and marketing of broadband. As the operator topped five million broadband customers, it entered the vibrant new netbook segment, with plans to bundle ASUS’s compact EeePC with a Huawei 3G modem. [pp.38,40,41,42.]

LATINOAMÉRICA: Brazil and Venezuela were the powerhouses behind the region’s 12.2% organic revenue growth in H1, supported by Mexico and Argentina. Wireless is the key driver, assisted by broadband and pay-TV, as related efforts were made to reinvigorate wireline operations. However, some numbers were boosted by the acquisition of Telesp in Brazil. Regional capital expenditure topped EUR1bn in Q2, more than double the level of a year earlier and by far the richest in the Group, primarily allocated to GSM migration and 3G upgrades. Legacy CDMA networks could be shuttered within two years. Inflation is a growing concern in a number of markets, with Chile even contemplating disposals to strengthen its finances. José María Álvarez-Pallete sees the division raising margins, thanks to continuing scale benefits. [pp.21-31,46.]

Regional themes included inflation, price rises (Argentina and Brazil), price cuts (Colombia and Peru), and 3G (Chile, Colombia, Mexico, and Peru). WiMAX is also on a number of national agendas (Mexico and Peru), though not necessarily Telefónica’s. [pp.44,49,51.]

Ericsson secured a contract to act as the prime revenue assurance partner for Latinoamérica, offering turnkey deployment and optimisation services. XIUS-bcgi flagged the success in Ecuador of its pre-paid Payment Management service, with expectation of region-wide deployment. [p.43.]

In Argentina, Telefónica still does not appear close to securing the right to launch IPTV services. In Brazil, the company was obliged to explain a broadband blackout, apparently caused by network failure, at a time when it claims local success for broadband bundles. Vivo saw a marginal decline in mobile market share during June, but retains clear market leadership. [pp.24,43,44,45.]

Chilean anti-trust body TDLC could force through number-portability, possibly delaying introduction of 3G services in the process, as the authorities bickered over whether the local telecoms market is ready for liberalisation. Telefónica has grown its local pay-TV customer base significantly, to over 240,000, as it looks to launch consumer VoIP services in 2009 and reposition itself as a broadband player, rather than traditional telco. [pp.46,47.]

Movistar Colombia is pitching for a further EUR100m loan from the EIB, to fund expansion of its GSM network. [p.48.]

Number-portability was welcomed by Telefónica in Mexico, where it has set a seemingly ambitious goal of 33% market share by 2011. [pp.49,50.]

Terra Networks is to deploy SAP systems at eight Americas units. [p.52.]

EUROPE: Telefónica Europe’s results were hurt by comparison with prior-year periods that included the now-sold Airwave unit, without which revenue was said to have grown around 6%. However, it still looked weak compared to the other regions, and has the lowest capital expenditure by some distance. [pp.12,31-36.]

TOCR reshuffled its supervisory board and promoted Jose Perdomo to VP, Consumer. At regional level, Roger Sharp left his high-profile Director of Public Affairs post, to join the Australian Industry Group. [pp.3,53.]

TOCR is launching new mobile data tariffs, BlackBerry Business Mail, and hosted VoIP business services (with Ericsson). [p.54.]

In Germany, O2 seems to think it is over the worst, with the turnaround “on track”, tariffs largely rebalanced, and customer growth outpacing pricing declines. Nokia Siemens highlighted local deals that will see it enhancing 2G and 3G network capabilities, including reducing power consumption and extending the reach of mobile broadband services. As at other OpCos, O2 Germany is promoting the latter. [pp. 34-35,55.]

Customer “relevancy” and cost control are the priorities for O2 Ireland, which is facing heightened competition. The operator introduced HSUPA higher-speed mobile data services. [pp.35,57.]

O2 UK apparently had another market-leading quarter, with only Orange UK said to be challenging it. The operator is to bundle “free” fixed-broadband in a package with its mobile counterpart, for around EUR25 per month, which will also include unmetered access to Wi-Fi hotspots. Reports circulated that O2 UK could both lose its iPhone exclusivity, and gain a lower-end nano variant in time for Christmas. Jacada is to provide 850 ‘retention’ customer advisors with additional tools. [pp.33,57,59.]

ASSOCIATES / INVESTMENTS: Telefónica said it currently does not see a need to raise its investment in Telco, the consortium vehicle controlling Telecom Italia, seeming scotching rumours of capital and stake increases. Separately, talk circulated of leadership changes at TI, with suggestion that Telefónica wants to implant one of its own as Director-General. Morocco’s Meditel is to invest EUR368m over two years. [pp.4,13,61.]

EXTRACT

MEXICO: Telefónica welcomes portability

Javier Nadal, Vice-President of Investor Relations for Telefónica in Mexico, said number portability, which was recently instituted in Mexico, was a fundamental step towards greater competitiveness in the Mexican market.

Nadal said that moves must now be made to increase the availability of network interconnectivity in the country. Telefónica recently agreed an interconnectivity deal with powerful incumbent Telmex, although the terms and performance of the service continue to be a source of dispute between the competitors (Telefónicawatch, 2008.04-05).

[IT Digest, 10 July 2008.]

Movistar aims for 33% market share by 2011

Francisco Gil Díaz, Chairman of Telefónica in Mexico, was reported as having set a target of capturing one-third of the mobile telephony market in Mexico by 2011.

The comments came during an interview with Bloomberg Television, and Gil Díaz said the unit aims to increase its share from current levels at around 20% by capturing up to 40% of first-time mobile subscribers.

” Being one-third of the market in a few years is not an outlandish expectation…2011 is a reasonable horizon. ”
– Gil Díaz.

Analysts appeared to suggest that Telefónica’s goals might be too ambitious, however, and Cesar Jimenez, Senior Latin America Analyst with Pyramid Research Group in Boston, predicted a 23% share by 2011 could be the best Telefónica could hope for.

” We forecast a fairly stable market share for Telefónica. 33% is a little high, given the level of competition. ”
– Jimenez.

A report from Canadian research group IEMR predicted that 19.5 million new mobile subscribers will come up for grabs in Mexico between 2009 and 2010.

Following the introduction of mobile number portability, IEMR slightly raised its forecasts for customer growth in the country, predicting that the total number of subscribers in Mexico will increase from a projected 79.4 million in 2008 to 98.9 million in 2010, giving the country a penetration level of 91.2% by the same date.

It predicted that Telcel’s market share will decline from 72.8% in 2008 to 68.1% in 2010, as Movistar continues to gain share.

However, it also predicted that introduction of number portability will not be backed up with major price cuts.

” This is because Mexico has minutes of use (MOU) levels already close to developed country levels; and operators’ revenue per minute (RPM) numbers are approaching some of the lowest levels in the world. Further price and tariff cuts would not be in their interest. ”
– Carlos Fernandez, Principal Research Associate, IEMR.

[Bloomberg, 23 July 2008; IEMR, 31 July 2008.]

TABLE OF CONTENTS

3 Telefónica Group
3 Financial reports;
M&A;
People
4 Meditel;
Regulatory
5 Q2 / H1 FY08 Results
38 Telefónica de España
38 Partnerships;
Regional
39 iPhone
40 Regulatory
41 Broadband
42 Devices
43 Telefónica Latinoamérica
43 Regional deals;
Argentina
44 Brazil
45 Vivo
46 Chile
48 Colombia
49 Equador;
Mexico
50 Panama
51 Peru
52 Terra Networks
53 Telefónica O2 Europe
53 Appointments;
Czech Republic
55 Germany
56 Ireland
57 United Kingdom
59 iPhone
60 Associates and investments
60 China Netcom;
Portugal Telecom;
Sogecable
61 Telecom Italia
62 INDEX

INDEX

A
Aetka, 56
AIRCOM International, 58
Airwave Safety Communications Ltd, 8, 31
Alegro, 49, 50
Allianz SE
Dresdner Bank
Dresdner Kleinwort, 3
América Móvil, 44, 48, 49
Claro, 44, 45, 46, 51
Comcel, 48
Porta, 49
Telcel, 50
Anatel, 44, 45
Apple, 57, 59
iPhone, 15, 35, 39, 56, 57, 59
ASUS, 42
Australian Industry Group (Ai Group), 3
B
Belgacom, 3
Bitbuzz, 56
Brasil Telecom, 44
BSkyB, 60
BT Group, 6

C
Carphone Warehouse, 57
China Netcom, 60
Cisco Systems, Inc., 52
Citigroup, 3
CMT, 40
Collins Stewart, 4
COLT Telecom, 56
Comcast, 53
Comfer, 43
Credit Suisse Group CS, 4, 60
D
Deutsche Bank, 4
Deutsche Telekom, 3
E
eBay, 45
Entel, 46
Ericsson, 43, 54
European Union, 4
European Investment Bank, 48
F
FNE (Chile), 47
Fossati family, 3, 61
France Télécom, 3
Orange, 17, 41, 59
Orange UK, 59

G
Ghana Telecom, 60
Google, 38
H
Hellenic Telecommunication Organization (OTE), 3
Huawei, 42
I
IBM, 35
IE Market Research Corp. (IEMR), 50
Indec (Argentina), 43
Indra, 52
J
Jacada, 59
Jazztel, 17, 41
JPMorgan, 3
M
Merrill Lynch, 60
Microsoft, 54
Windows Mobile, 38
MTC, 51
N
News Corporation
BSkyB, 60
Nokia, 42, 55
Nokia Siemens Networks, 55

O
Optimus, 60
Organic, 5, 10
P
Portugal Telecom, 4, 60
Prisa, 60
ProInversión, 51
Pyramid Research, 50
R
Regions
EMEA
Czech Republic, 13, 36, 53, 54
Europe, 3, 4, 5, 8, 10, 12, 13, 31, 32, 33, 34, 35, 48, 53, 55, 59, 60
France, 3
Germany, 6, 10, 13, 34, 55, 56
Ireland, 35, 56, 57, 59
Italy, 3, 13, 61
Portugal, 4, 60
Slovakia, 36
Spain, 3, 4, 5, 6, 13, 14, 15, 17, 37, 38, 39, 40, 41, 42, 52, 53, 60
UK, 3, 6, 10, 35, 45, 56, 57, 58, 59, 60
Latin America, 4, 5, 6, 8, 13, 22, 23, 26, 43, 50
Argentina, 9, 11, 21, 23, 25, 43, 52
Brazil, 9, 11, 13, 21, 23, 24, 37, 44, 45, 52
Central America, 9, 11, 30
Chile, 9, 11, 13, 23, 26, 37, 46, 47, 51, 52
Colombia, 9, 11, 13, 28, 48, 52
Ecuador, 9, 11, 30, 43, 49, 50
El Salvador, 52
Guatemala, 52
Mexico, 9, 11, 13, 21, 23, 29, 37, 49, 50, 52
Nicaragua, 52
Panama, 50, 52
Peru, 9, 11, 13, 21, 23, 27, 37, 48, 51, 52
Uruguay, 9, 11, 30
Venezuela, 9, 11, 21, 29, 52
North America
USA, 52
Research in Motion, 54
Research In Motion
BlackBerry, 18, 38, 54
Royal KPN, 3
S
SAP AG, 52
Siemens, 55
Sierra Wireless, 58
Sogecable, 8, 60
Spacenet, 56
Spanish Chamber of Commerce, 38
Subtel (Chile), 46, 47
Supertel, 49

T
Tchibo, 34
TDLC (Chile), 46, 47
Technologies
2G, 55, 59
CDMA, 22, 49
Edge, 55
3G, 15, 18, 22, 39, 46, 49, 51, 55, 57, 59
HSDPA, 39, 55, 57
HSUPA, 55, 57
4G
WiMAX, 47, 49, 51, 52
ADSL, 12, 13, 16, 18, 42
Broadband, 3, 6, 10, 12, 13, 15, 16, 17, 18, 19, 21, 22, 23, 24, 27, 32, 33, 36, 38, 41, 42, 43, 44, 47, 48, 52, 55, 57, 61
Centrex, 54
DSL, 31, 33, 34, 35
DVB-T, 55
GSM, 21, 22, 23, 26, 48, 50, 55, 58
ICT, 3, 36, 38, 56
IP, 54
IPTV, 41, 43
M2M, 45
MMS, 35
SMS, 35, 36, 53
UMTS, 58
VoIP, 47, 54
WLAN, 55
Wi-Fi, 39, 56, 57
Telecom Italia, 3, 13, 15, 61
Bernabe, Franco, 3, 61
Entel, 46
TIM Brasil, 45
Telefónica Group, 3, 5, 7, 9, 11, 12
Associates and investments
China Netcom, 60
China Unicom, 60
Portugal Telecom, 4, 60
Sogecable, 8, 60
Telecom Italia, 3, 13, 15, 61
Atento, 37
España, 8, 10, 12, 14, 15, 16, 18, 19, 20, 38, 40, 41, 42, 53
Movistar, 39, 42
Executives
Álvarez-Pallete Lopez, Jose Maria, 22, 23, 24
Anglada, Salvador, 53
Ansaldo, Guillermo, 15
Erskine, Peter, 57
Fernández Valbuena, Santiago, 5, 6, 21, 33, 34, 36
Gilpérez López, Luis Miguel, 43
Key, Matthew, 33, 34, 35
Linares, Julio, 3, 13
Linares, Simon, 53
Lopez Blanco, Carlos, 4
Lynch, Jude, 57
Manzanares, Javier, 51
Molés, José, 47
Nadal, Javier, 49
Perdomo, Jose, 53
Purdy, Nigel, 58
Zaplana, Eduardo, 53
Ex-executives
Williams, Dave, 53
Latinoamérica, 10, 12, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 43
Argentina, 9, 11, 25, 43, 44
Brazil, 9, 11, 24
Chile, 9, 11, 26, 46, 47
Colombia, 9, 11, 28, 48, 49
Peru, 9, 11, 27, 51
Telefónica International Wholesale Services, 31
Telemergencia, 46
Meditel (Morocco), 4
Móviles, 9, 11, 25, 26, 27, 28
Movistar, 39, 42, 43, 44, 46, 48, 49, 50, 51
Argentina, 43, 44
Chile, 46
Colombia, 48, 49
Peru, 51
O2 Europe, 3, 8, 9, 11, 33, 34, 35, 36, 53, 54, 55, 56, 57, 58, 59
Czech Republic, 9, 11, 36, 53, 54
Fonic, 34
Germany, 9, 11, 34, 55, 56
Ireland, 9, 11, 35, 36, 56, 57, 59
O2 Clear, 35
O2 Group, 53
Tchibo Mobile, 34
Telefónica Deutschland, 35, 56
UK, 9, 11, 33, 57, 58, 59
Products and services
Genion (Germany), 34
O2 Mobile Broadband, 57
Terra, 52
Teléfonos de México (Telmex), 49
Telemar
Oi, 44, 45
Telit Wireless, 45
Tesco, 33
Tesco Mobile, 33
Thomson, 3, 40
Tigo, 48
U
UBS, 45
Upaid Systems, 45, 46
V
Vivo Participações, 9, 11, 24, 45, 48
Telemig Celular (Brazil), 13, 23, 24
Vodafone Group, 3, 6, 14, 60
Spain, 14
X
XIUS-bcgi, 43
Y
Ya.com, 17, 41
Yoigo, 15

Written by AB · Filed Under KnowTelefonica 

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