Telefonicawatch, issue 2008.10 snapshot
18 November 2008
Telefónica reported its results for the first nine months of 2008, showing solid growth despite sharp headline falls in OIBDA and net profit caused by previous one-off capital gains from the 2007 sales of Airwave and Endemol. Continued strong growth in Latin America across wireless and fixed-line services indicated that — at least for now — the company is sufficiently diversified to deal with the global financial downturn. Early results from Telefónica units had already indicated the company was performing sufficiently well to meet targets and that expectations would be met. An interim dividend of EUR0.50 was also paid, again in line with previous statements of intent. [pp.3-6.]
Issue: 2008.10
Covering: October to November 2008
Published: November 2008
Next issue: December 2008
Delivering valuable insight into the labyrinth that is Spain’s global telco giant. A unique monthly report for the industry.
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EXECUTIVE BRIEF
Telefónica reported its results for the first nine months of 2008, showing solid growth despite sharp headline falls in OIBDA and net profit caused by previous one-off capital gains from the 2007 sales of Airwave and Endemol. Continued strong growth in Latin America across wireless and fixed-line services indicated that — at least for now — the company is sufficiently diversified to deal with the global financial downturn. Early results from Telefónica units had already indicated the company was performing sufficiently well to meet targets and that expectations would be met. An interim dividend of EUR0.50 was also paid, again in line with previous statements of intent. [pp.3-6.]
There were rumours that Telefónica could tie with French media company Vivendi to acquire Digital+, Prisa’s pay-TV business. [p.7.]
Huawei trumpeted a deal that has seen it provide Telefónica with a worldwide 40Gbps transmission network and associated solutions, which it said had helped Telefónica reduce costs and improve reliability. [p.7.]
ESPAÑA: While Telefónica finalised jobs cuts at its Móviles and Soluciones units in Spain as part of integration plans, there was controversy surrounding a proposal to allow long-serving staff to take early retirement from the age of 48. [p.8.]
A study of EU-wide broadband pricing found Spain’s prices substantially above the norm, with Telefónica’s charges also significantly higher than European incumbent peers. Despite this, broadband growth continues in Spain, and Telefónica is maintaining a very strong grip on its market share. Movistar España also stretched its lead over Vodafone Spain, in terms of market share, but Orange Spain added the most subscribers in the latest monthly figures from the CMT. The mobile unit also expects to distribute ten million handsets in 2008. [pp.9,13.]
Telefónica was reportedly required to pay Orange Spain EUR20m for failing to maintain its database on the state of local loop unbundling, with Orange also successful in having the commercial launch of Telefónica’s fibre-to-the-home network paused. The regulator set out further proposals for regulatory requirements to be placed on new network providers installing fibre in buildings and offices. [pp.10-11.]
Alcatel-Lucent highlighted a contract with Telefónica in Spain, for the provision of mailbox services across all the telco’s national platforms to be delivered over an open, multi-level architecture. [p.12.]
LATINOAMÉRICA: Microsoft is set to challenge VoIP providers such as Skype, through an integrated PSTN-in and PSTN-out IP telephony offering within its Live Messenger product developed by Telefónica, called Voype. Initially available in the USA, the service will be offered and marketed across Latin America by the two companies. [p.14.]
In Argentina, Telefónica drew attention to a meeting with the government, where it is thought to have agreed price overhauls for fixed-line services and discussed plans for increased convergence, perhaps indicating progress is being made on plans for Telefónica to offer its pay-TV services. [p.15.]
Telefónica in Argentina announced IP telephony services for both the SME and larger corporate segments. The corporate proposition entails the telco partnering with Siemens Enterprise Communications. A new vehicle-tracking solution was also unveiled, while, in Brazil, Vivo is trialling a SIM-based tracking solution for this rapidly growing market. [pp.15-16,19.]
Movistar Argentina claimed to be the first operator in Latin America to offer netbooks, and hopes to sell 10,000 of the scaled-down laptop computers. There were reports that the company expects to attract 400,000 users for 3G services in 2009, who will connect to the network using mobile phones, PC cards, and devices such as netbooks. [p.17.]
In Brazil, wireless broadband is under consideration as Telefónica undertakes WiMAX trials with Motorola and Intel. The Brazilian unit also gave an indication of its plans for fibre networks, which it considers could lead to a wider range of “digital home” offerings from Telefónica. [p.18.]
Vivo heralded its expansion into the northeast states of Pernambuco and Ceará, after increased network investment followed its recent acquisition of spectrum licences for the region. A EUR134m credit line was also arranged to fund further expansion. [pp.19-20.]
After being rebuffed at the first time of asking, Telefónica’s second offer for the shares it did not own in its fixed-line business in Chile was accepted by 94% of shareholders. The company is now planning increased integration within its Chilean operations. [p.20.]
Telefónica in Chile announced it was increasing all of its broadband speeds without further charge, with customers on the cheapest tariffs seeing speeds doubled. [p.21.]
Telefónica in Mexico criticised a ruling by the competition authorities that, according to the company’s Chairman, concluded the company had a monopoly position in the fixed-line market, despite miniscule market share. The company continued to call for increased competition in the Mexican market and identified the high number of local calling areas as a barrier to competition, as well as bemoaning the slow pace of broadband adoption. [p.22.]
The mobile market in Peru was said to be growing quickly, with areas around the capital already at 100%-penetration. However, Movistar Peru appears confident that the growth can continue and that the market may justify further investment. Number portability could be introduced in Peru in 2009, if regulatory proposals are approved. [p.23.]
Movistar has reportedly taken the lead in terms of market share in the Uruguayan market ,for the first time. [p.23.]
Satellite pay-TV services were launched in Venezuela, alongside a series of bundles with discounts that increased depending on the number of products included. [p.24.]
TELEFÓNICA EUROPE: A new handset for older customers was announced in the Czech Republic, while in Germany the low-cost Fonic brand is to be made available in more retail sites, following an agreement with electronics businesses MediaMarkt and Saturn. [pp.25-26.]
In Ireland, O2 announced a new SME-oriented, fixed-line voice and broadband offering, using services provided by incumbent Eircom. The move is part of increased O2 efforts to challenge Vodafone Ireland in the small business market. The rollout of fixed-line services using Deutsche Telekom’s network is also planned for O2 Germany in 2009. [pp.26-27.]
Mobile broadband packages were overhauled by O2 UK, and it would appear the operator is recycling lessons learnt from the launch of fixed-broadband service and taking steps to ensure users are satisfied with connectivity and performance. [pp.28-29.]
O2 UK introduced a new rewards scheme intended to promote loyalty, called Priority Club, which is modelled on airline frequent-flyer schemes. Customer are encouraged to maintain levels of spend throughout the year, incentivised by a range of rewards and benefits, with the process for early upgrades being formalised. As part of further efforts to build the O2 brand as a lifestyle accessory, a deal was signed with Academy Music Group to rebrand more live music venues across the country with the O2 moniker. O2 shops are to be overhauled, to feature lounge areas, ‘live’ handsets for testing, and highly-trained staff. The presence of in-store live demonstrations has already led to increased thefts, however. [pp.29-30,32.]
A new virtual development lab for applications to be used on O2 UK’s network was announced by DeviceAnywhere, a mobile application development solution provider. Steria, a France-based IT services company, announced it had extended its business process outsourcing (BPO) contract with O2 UK until 2014. [pp.31,33.]
ASSOCIATES & INVESTMENTS: China Netcom posted its last set of results as an independent unit from merger partner Unicom, as trends showing a declining fixed-line customer base but increasing numbers of broadband users continued. The Chairman of PCCW and China Unicom are attempting to take the Hong Kong operator private, with an offer to shareholders for the stake the two parties do not already control. [pp.34-35.]
Portugal Telecom attempted to reassure the markets it was in a robust position to survive independently, and Telecom Italia unveiled Q3 results that exceeded expectations. Both European companies are benefitting from strength in the Brazilian mobile market. TI could also increase its influence in Argentina. Nokia Siemens won a contract to upgrade the TIM 3G network in Italy. [pp.36-38,39.]
EXTRACT
ESPANA: MARKET STATISTICS
Movistar second to Orange in mobile customer additions
The CMT, the Spanish regulator, announced that the number of mobile connections in Spain had increased by 248,525 in September 2008, a 4.9%-increase on a year earlier that took the total number of lines to 50.3 million, and mobile penetration to 111.4%.
Pre-pay accesses numbered around 162,000, nearly twice the number of contract lines. The CMT reported that in the quarter ended 30 September 2008, Orange gained the greatest number of new lines, accounting for 31.3% of new connections, followed by Movistar with 25.4%, and Vodafone with 17%. 3G operator Yoigo acquired 16.2% of new lines and virtual network operators accounted for 10.2% of the new adds.
Movistar’s performance in terms of number portability was roughly neutral, losing 113,027 accesses, but gaining 112,125 (a 902 fall in customers). Both Vodafone and Orange lost around 5,000 customers in September through number portability, while Yoigo gained more than 5,000 and virtual network operators attracted around 6,000.
Telefónica maintains grip on broadband market in Spain
Figures from regulator the CMT showed that in September 2008, the total number of broadband lines in Spain increased by 82,077, representing annual growth of 15%, taking the total number of broadband connections to 8.79 million and broadband penetration to nearly 20%.
Of the total lines, 72,997 were DSL connections, with the remainder cable broadband links. Cable operators now account for 1.73 million broadband accesses. Telefónica performed particularly strongly in the month, recording 71.7% of all new broadband lines, with alternative operators claiming 24.4%, and cable operators 3.9%. Telefónica’s market share now stands at 57.2%, alternative DSL providers at 22.4%, and cable operators at 20.4%.
Porting makes presence felt in Spanish fixed-line market
The total number of fixed lines in Spain dropped slightly in September 2008 compared to a month earlier, according to regulator the CMT, although the total was up 1.3% compared to a year earlier, at 20.1 million lines (equalling 44.5 lines per 100 inhabitants). 78,257 lines were ported in September, a 73.8%-increase on a year earlier.
The trend for fixed-line portability is most likely to see Telefónica, as incumbent, lose customers. As fixed-line users ported to other operators, the popularity of carrier pre-selection services declined by 13,882, compared to an increase of 4,631 in September a year earlier.
[Further reference: La telefonía móvil añade 248.000 nuevas altas en Septiembre -- CMT, 6 November 2008.]
TABLE OF CONTENTS
3 Telefónica Group
3 Results;
Financial reports
4 Lycos Europe
5 People
6 Society
7 Acquisitions;
Suppliers
8 Telefónica España
8 Employment;
Imagenio
9 Broadband;
Devices; iPhone;
Tariffs and pricing
10 Fixed-line;
Network
12 Suppliers
13 Market statistics;
Wireless networks
14 Telefónica Latinoamérica
14 Regional deals
15 Argentina
18 Brazil
19 Vivo
20 Chile;
Colombia
22 Mexico
23 Peru;
Uruguay
24 Venezuela
25 Telefónica Europe
25 Czech Republic
26 Germany
27 Ireland
28 United Kingdom
34 Associates and investments
34 China Netcom (Unicom);
Hispasat
36 Portugal Telecom
37 Telecom Italia
40 INDEX
INDEX
A
Academy Music Group, 32
Airwave Safety Communications Ltd, 3
Alcatel-Lucent, 12
América Móvil, 23
- – Claro, 23
- – CTI Móvil, 16
Apple, 9
- – iPhone, 9
B
Banesto Bolsa, 3
Bernstein, 3
Bertelsmann, 4
BNP Paribas, 3
Boingo, 13
Brasil Telecom, 18
BT Group, 26
C
CFE (Mexico), 22
China Central Television, 8
China Netcom, 34, 35
Cloud, The, 28
CMT, 9, 10, 11, 13
Cofeco (Mexico), 22
ComReg, 27
D
Deutsche Bank, 36
Deutsche Telekom, 6, 26
- – T-Mobile, 25, 28
DeviceAnywhere, 31
E
Eircom, 26, 27
- – Meteor, 27
Emporia, 25
Endemol N.V., 3
Ericsson, 30
ETB, 20
European Union, 9
- – European Commission, 11
Eutelsat, 34
F
Fitch, 15
FNE (Chile), 21
Foro Ecuménico Social de Argentina, 14
Fortis, 5
France Télécom, 6
- – Orange, 10, 13
Freenet, 7
G
Goldman Sachs, 3, 36
Grupo Santander
- – Santander, 20
- – Santander Bank
- – Santander Investment, 20
Grupo Werthein, 39
H
Hansenet, 37
Hilton Group, 19
Hispasat, 34
HSBC, 36
Huawei, 7
Hutchison Whampoa
- – H3G, 38
- – UK, 31
I
Intel, 18
Inversuegos, 3
J
JHP, 29
JPMorgan, 36
K
Komercni Banka, 6
L
LG, 17
Live Nation, 32
Lycos, 4
M
Media Markt, 26
Metropolis Music, 32
Microsoft, 14
Morgan Stanley, 5, 20
Motorola, 18
MSN, 14
MTC, 36
MVNOs, 9
N
Net Servicos, 18
NII Holdings, Inc., 21
Nokia, 6, 24, 39
Nokia Siemens Networks, 39
O
O2 Arena, 29, 32
Oberthur Technologies, 19
Osiptel, 23
P
Pacific Century Regional Developments, 35
PCCW, 35
- – Li, Richard, 35
Phorm, 33
Player X, 29
Portugal Telecom, 6, 36
Portugal Telecom, Bava, Zeinal, 36
Prisa, 7
- – Digital+, 7
R
Redeem, 27
Regions
- – EMEA
- – Czech Republic, 6, 25, 32
- – Europe, 3, 4, 5, 6, 9, 11, 25, 31, 32, 33
- – France, 6, 33, 34, 37
- – Germany, 4, 7, 26, 32, 37, 38, 39
- – Ireland, 4, 26, 27
- – Italy, 9, 27, 38, 39
- – Portugal, 6, 36
- – Slovakia, 6
- – Spain, 3, 4, 5, 8, 9, 10, 11, 12, 13, 32, 34
- – UK, 4, 12, 26, 27, 28, 29, 30, 32, 33
- – Latin America, 3, 4, 5, 13, 14, 17, 18
- – Argentina, 14, 15, 16, 17
- – Brazil, 4, 6, 14, 18, 19, 20, 36, 37, 38
- – Chile, 6, 14, 20, 21
- – Colombia, 14, 20
- – Mexico, 4, 22
- – Peru, 4, 6, 14, 23
- – Uruguay, 23
- – Venezuela, 14, 24
Royal KPN, 9
- – Simyo, 9
S
Salterbaxter, 6
Samsung, 24
Saturn, 26
Siemens, 16, 39
Simyo, 9
SJM Concerts, 32
Skype, 14
Sofora, 39
Sogecable, 7
Sonaecom, 36
Sony, 30
Sony Ericsson, 30
Steria, 33
Subtel (Chile), 21
T
Technologies
- – 2.5G, 18
- – 2G
- – PHS, 34
- – 3G, 9, 13, 17, 21, 39
- – HSUPA, 17
- – 4G
- – LTE, 39
- – WiMAX, 18
- – ADSL, 36
- – Broadband, 3, 4, 6, 7, 9, 13, 15, 16, 17, 18, 21, 22, 24, 26, 27, 28, 29, 33, 34, 37, 39
- – Carrier pre-selection, 13
- – DSL, 7, 13, 26
- – DTH, 18
- – FTTH, 10
- – ICT, 14
- – IP, 14, 16
- – IPTV, 10
- – M2M, 19
- – Mobile Broadband, 33
- – PSTN, 14
- – SIM, 19, 26
- – SMS, 12, 25
- – VoIP, 14, 16
- – WLAN
- – Wi-Fi, 13, 17, 28
Telecom Argentina, 16, 39
Telecom Italia, 27, 37, 38, 39
- – Alice, 37
- – Bernabe, Franco, 37
- – Lambarri, Carlos, 37
- – TIM Brasil, 38
Telefónica Group, 5, 15
- – Associates and investments
- – China Netcom, 34, 35
- – China Unicom, 34, 35
- – Lycos Europe, 4
- – Portugal Telecom, 6, 36
- – Sogecable, 7
- – Telecom Italia, 27, 37, 38, 39
- – Atento, 18
- – Contenidos, 17
- – España, 3, 4, 8, 9, 10
- – Movistar, 9
- – Telefónica Soluciones, 8
- – Executives
- – Abril, Luis, 8
- – Alierta, César, 15
- – Anglada, Salvador, 6
- – Caride, Eduardo, 15
- – Dunne, Ronan, 32
- – Earle, Jonathan, 28
- – Flormann, Björn, 26
- – Galdo, Elizabeth, 23
- – Gil Díaz, Francisco, 22
- – Haselden, Joe, 29
- – Lynch, Jude, 27
- – Magnalardo, Cristian, 17
- – Mendes, Hilton, 19
- – Miodownik, Daniel, 16
- – Rampling, Peter, 28, 30
- – Rodriguez Zarco, Jose Luis, 15
- – Shurrock, Stephen, 29
- – Valente, Antonio Carlos, 18
- – White, Oli, 33
- – Ex-executives
- – Villalonga, Juan, 5
- – Latinoamérica, 3, 4, 14
- – Argentina, 15, 16, 17
- – Argentina (Telefónica Negocios), 16
- – Brazil, 6, 18
- – Brazil (TVA), 3
- – Chile, 20, 21
- – Mexico, 22
- – Movistar TVdigital (Venezuela), 24
- – Peru, 6, 23
- – Telefónica Empresas, 15, 16
- – Telefónica International Wholesale Services, 13
- – Venezuela, 24
- – Voype, 14
- – Móviles, 8, 23
- – Movistar, 9, 13, 14, 16, 17, 23, 24
- – Argentina, 16, 17
- – Peru, 23
- – Venezuela, 24
- – O2 Europe, 4, 5, 6, 25, 26, 27, 28, 29, 30, 31, 32, 33, 39
- – Be Un limited (UK), 33
- – Czech Republic, 6, 25
- – Fonic, 26
- – Germany, 26
- – Happiness Guarantee, 28, 29
- – Ireland, 27
- – O2 Broadband, 29, 33
- – O2 Wireless Festival, 32
- – Priority Club, 30
- – Telefónica Deutschland, 26
- – UK, 4, 28, 29, 30, 31, 32, 33
- – Products and services
- – Imagenio, 8
- – Speedy (Latinoamérica), 14
- – Terra, 4, 17
Teléfonos de México (Telmex), 22
Telemar
- – Oi, 18
TVA, 3
U
UBS, 36
Ukash, 12
United Internet, 7
V
Versatel, 7
Vivendi Universal, 7
Vivo Participações, 4, 6, 18, 19, 20, 36
- – Telemig Celular (Brazil), 3, 6
Vodafone Group, 6, 7, 13, 25, 26, 27
- – Ireland, 27
VTR, 21
W
Walt Disney, 17
Wavecom, 19
WestLB, 7
Y
Yoigo, 13
Z
ZenithOptimedia, 32
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