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Telefonicawatch Report #53 February-March 2011 Executive Brief

12 April 2011

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Executive Brief from Telefonicawatch, report #53. Click through for: an Extract from this month’s report; the Report Snapshot; or to contact us for more information about the full 106-page report, this industry standard monthly report service, and ongoing subscription access.

 

  1. Telefónica Group published its financial results for 2010, with the company hitting targets in demanding conditions, but seeing a somewhat disappointing end to the year. Operations in Spain continue to weigh on the Group, with signs that competitors are taking competition up a gear. However, absorption of Vivo in Brazil helped give the results a better sheen, and emphasise that the telco’s revenue and profit mix has decisively shifted to Latin America over the years of the global economic crisis. Telefónica Europe, meanwhile, continues to defend its position, although margins remain leaner, competition intense, and growth difficult to come by. [pp.4-29.]
  2. Telefónica highlighted success in hitting financial targets for eight successive years, but took a change in tack for its current guidance, setting a low end target to exceed its forecast, rather than its more traditional range of numbers, which had provided ‘stretch’ targets the company considered it could meet. The more conservative approach is reportedly intended to provide operational flexibility should market conditions require the telco to react aggressively to competitive conditions. It was also noted that Telefónica is no longer expecting to cut capex, but is beginning to see need for investment to meet increased data demands being placed on its fixed and mobile infrastructure. [pp.10,5.]
  3. Mobile World Congress in Barcelona saw Telefónica focus on the potential of mobile data, and the role of operators in mobile applications. The telco juggled announcements of its own application developer programme BlueVia, which is said to offer developers revenue opportunities from the “crown jewels” of operator APIs; and its support for the Wholesale Application Community (WAC), which is aiming to create a unified ecosystem for mobile application development, with operators in a central role. Telefónica was outwardly positive about the potential for WAC to succeed, but seems to expect little from the initiative in the short term, and continue to focus on building its own relationships with the developers. Aside from announcements supporting apps from eBay, a billing agreement with Research In Motion’s BlackBerry App World, and a couple of research and development projects, Telefónica’s main contribution to innovation at MWC was the unveiling of Frigo, a multi platform solution promising “true ownership” of mobile apps. However, a launch date for the service was not announced, and a commercial brand is yet to be unveiled. Telecom Italia is expected to have a version of Frigo available by the end of April. [pp.32-38.]
  4. The Telefónica drive for mobile data in Latin America is taking a two pronged approach, with initiatives underway to put more sophisticated, but lower cost, handsets in consumers’ hands, coupled with projects to bring applications and services associated with smart devices to more basic mobiles. Movistar branded smartphones from ZTE are to be launched across the region; and production has finally begun on a range of new devices at a factory jointly run with Bess Mobile in Venezuela. Meanwhile, companies including Acision and Myriad are trumpeting deals that will see richer messaging services and social networking features made available to all Movistar customers, and applications such as Telefónica’s own Tokes text notification offering are widening the scope, and potential market, for data services. It is also notable that Frigo is flagging Java compatibility, which will bring more Latin American devices into the addressable market. [pp.56,68,58,59,55,36.]
  5. Movistar España announced the launch of La Segunda Línea de Movistar, an additional virtual line for mobile customers that does not require a dual SIM or other new hardware. The service, which is free to add, is positioned as providing a line that can be used to contact people and services outside the trusted sphere of family, friends, and work. Calls and texts are charged at the same rate as the principal line’s tariff. While an additional IP line is the type of service expected to evolve from Telefónica’s acquisition of JAJAH, the new offering is based on services from FonYou. [p.52.]
  6. While rivals in the UK appear to have moved ahead of O2 UK in terms of commercial launches for mobile payment services, the division is continuing to build its customer base and product portfolio. The second half of 2011 is expected to see O2 UK launching new mobile payment services, although NFC payments appear some way off. One of the obstacles to NFC uptake will be availability of infrastructure from a banking and retail perspective, in addition to the need for compatible handsets, so logic can be seen in O2′s current focus on building financial services customer relationships ahead of widespread deployment. O2 UK claimed more than 800,000 customers for insurance and payment services, while, in Brazil, Vivo is said to have in excess of 500,000 users of its co branded Itaucard credit card, meaning that Telefónica Group can now claim commercial relationships in the financial services sector with more than 1.3 million customers. O2 Ireland launched O2 Money, a pre paid Visa card, similar to earlier UK offerings. In Spain, a ground-breaking agreement was announced by Movistar, Orange, and Vodafone, to collaborate on development of NFC standards in the country, so as to smooth the path towards widespread availability. [pp.84-86,62,78,45.]
  7. In his keynote speech at MWC, César Alierta was upbeat on the position of operators in the increasingly digital future, and reasserted Telefónica’s intention to increase its ‘share of wallet’. through expansion into areas such as e health and mobile payments. [pp.39-41.]
  8. Despite claims that significant acquisitions were not in the pipeline, Telefónica was linked to deals in Germany and Poland. After delays caused by difficult market conditions, a spin off of contact centre business Atento appears back on the cards. [pp.32,31,30.]
  9. Telefónica Multinational Services won a contract with Fujitsu, to become its sole provider of mobile services in Europe, putting to good use Telefónica’s previously announced alliances with other operators across the continent. TIWS awarded Interoute a contract to become its core fibre optic network provider in Western Europe. [pp.42,41.]
  10. In Spain, Movistar was seen to be taking steps to combat encroaching competitors, in both the broadband and mobile markets, with an offer of a 25% reduction in call costs from mobile lines until 2012 for new subscribers to its fixed broadband offering. Value added services for its bundled services were also highlighted, as the operator attempts to counter what it describes as “non rational” competition, which is seeing the telco perform poorly in terms of net addition gains in its core Spanish markets. [p.51.]
  11. Alcatel Lucent won a contract to support the roll out of femtocell services across the country with Movistar España. [p.49.]
  12. Telefónica Latinoamérica announced a new initiative to support the development of ICT business on the continent. Few details were provided about the incubator project, however, which follows a recent $100m initiative launched in Chile. [p.55.]
  13. Telefónica in Argentina continued to build its ICT services for SME customers, with a new Virtual IP Central offering providing virtual PBX style services. [p.61.]
  14. In Brazil, Vendtek announced a contract with Telefónica to provide pre paid recharge services for the telco’s fixed line customers; and in Colombia, XIUS won a deal to support loyalty and payment programmes for Movistar customers. [pp.63,66.]
  15. After a period when investment and capabilities of its data network were being questioned, O2 UK trumpeted completion of an upgrade that made 3G services available using 900MHz spectrum in London, spreading to other cities in the country. Ericsson and NSN were named as partners for projects to upgrade the operator’s 3G network. O2 UK head Ronan Dunne outlined a vision of LTE as a version of a high quality toll road. [pp.80,81,83.]
  16. Telefónica Europe announced smart metering deals in Germany and the UK, as its M2M services unit shows signs of gaining traction. In Germany, a deal with Zabel to provide potentially 700,000 SIM cards was announced, while O2 in the UK is to manage and monitor a smart meter network for G4S. [pp.74,87-88.]
  17. O2, Orange, and Vodafone in the UK are trialling television broadcast services using IMB technology; and, in Spain, Movistar upgraded its mobile television offering. In Ireland, however, regulator proposals to open up radio spectrum for mobile television licences were shelved due to lack of operator interest. [pp.92,53,53,78.]
  18. Mobile termination rate cuts continue to have an impact on Group performance, and further reductions continue to filter through, with regulators in Germany and the UK announcing substantially lower rates, albeit with the decline in the UK being on a gentler slope than cuts imposed in Germany. [pp.25,73,82.]
  19. Telecom Italia is set to see changes to its senior management, with Telco SpA reportedly approving a new Executive Chairman role for current Chief Executive Franco Bernabe, and new board level positions with a focus on operational matters in Italy and Latin America to be created. China Unicom continues to add to its smartphone portfolio, as 3G growth continues. The operator launched its own Wophone operating system. [pp.97-98,95,97,96.]

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About Telefonicawatch

Report: #53
Covering: February-March 2011
Published: April 2011
Next report: May 2011

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Written by AB · Filed Under Telefonicawatch (Movistar/O2) 

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