IHS Global Insight Perspective | |
Significance | Telefónica set out its targets to 2013, including annual revenue growth of 1–4% to 2013. |
Implications | Voice and subscription revenues are set to fall as a percentage of total revenues with broadband taking up the slack. |
Outlook | Telefónica will be looking at licensing in Europe to gain LTE licences and grow its data revenues. |
At its investors conference in London, Telefónica has set out its forecasts to 2013. Its Chairman César Alierta laid out a comprehensive growth plan including the following points:
- Telefónica is aiming to grow its revenues by 1–4% annually to 2013.
- It anticipates that revenues from subscriptions and voice traffic will decrease by between 1–3%, but that broadband services will make up for this with 12–16% compound annual growth.
- This will result in broadband revenues accounting for 25%of its revenue mix.
- It aims to maintain its operating income before depreciation and amortisation (OIBDA) margin in the high 30s.
- Total capital expenditures (capex) will be less than 27 billion euro (USD39 billion).
- By end 2013 it aims to have greater than 340 million subscriptions.
Telefónica also outlined priorities in its three functional regions: in Latin America, Telefónica plans to grow primarily through growing its voice usage and boosting broadband subscriptions; in Spain, Telefónica is primarily looking at profitability and making more efficient use of its capex spend; in the rest of Europe, Telefónica is focusing on revenue share growth through increased data usage. Telefónica does not anticipate further mergers and acquisitions activity, but will look at spectrum auctions in its current markets.
Outlook and Implications
- Upside on Revenue Growth: Telefónica’s forecast of 1–4% revenue growth leaves room for upside. Most of the revenue growth will continue to come from Latin America where it will be looking to maximise the advantages of consolidating its Brazilian operations into one company. Telefónica's forecast of falling voice and subscription revenues is in line with what other operators worldwide have experienced.
- Licensing Activities: A large portion of the EUR27 billion capex outlay will be spent on new spectrum to defend and enhance its existing operations. Spectrum auctions for 800 MHz and 2,600 MHz spectrum for Long Term Evolution (LTE) services are due in the Czech Republic, Spain and the United Kingdom with auction details already laid out (see Czech Republic: 31 January 2011: Czech Republic Plans 800-MHz Tender, Spain: 4 April 2011: Mobile Spectrum Auction in Spain to Commence in Mid-2011, and United Kingdom: 1 April 2011: UK Government Hints at Further Spectrum Releases Before 2020). While IHS Global Insight expects Ireland and Slovakia to issue licences before end-2013, both nations have already made some progress on this front with Slovakia issuing trial licences and ComReg launching a consultation on 800 MHz spectrum (see Slovakia: 10 December 2010: Orange Issued With LTE Trial Licence in Slovakia and Ireland: 20 September 2010: Irish Regulator to Sell Digital Dividend Spectrum in Liberalised Auction). There has been some progress in LTE licensing in Latin America, notably in Chile, which will serve as a template to the region (see Chile: 21 March 2011: Chilean LTE Auction Deferred Again Until H2—Report).
- LTE Spectrum Will Further its Data Growth: Gaining LTE spectrum will help Telefónica to boost its data revenues through a more attractive mobile internet package, with access speeds greatly enhanced compared to W-CDMA and HSPA networks. O2 Germany leads the way in this initiative with its LTE roll-out advanced; O2 Germany plans to launch its network by July 2011 (see Germany: 11 April 2011:Telefónica and Huawei Sign LTE Deal in Germany).