IHS Global Insight Perspective | |
Significance | The deal will enable both operators to strengthen their positions in their markets, to reduce costs, and to assist in developing synergies in their operations. |
Implications | Telenor and Telefónica will strengthen managed mobility solutions for multinational customers, expanding the geographical scope of their service portfolio and improving their interoperability and operational efficiency. |
Outlook | The deal fits in with each operator’s strategy of targeting growth and capital expenditure (capex) reduction. |
The Norwegian telecoms operator Telenor and Spain’s Telefónica have announced a partnership agreement to support each company’s multinational customer (MNC) requirements in 22 countries for mobile services, Cellular News reports. Under the terms of the deal, Telenor will support Telefónica in Norway, Sweden and Denmark. Telefónica will support Telenor in the 19 European and Latin American countries in which Telefónica currently has mobile operations (the United Kingdom, Germany, Ireland, Spain, Czech Republic, Slovakia, Mexico, Brazil, Argentina, Chile, Colombia, Venezuela, Peru, Ecuador, Uruguay, Guatemala, El Salvador, Nicaragua and Panama).
Each operator will support each other’s multinational markets, including the areas of rules of engagement, bid management, products and services, service-level agreements, and operational processes and systems. Kristin Skogen Lund, the executive vice-president of Telenor Group and head of its Nordic region, commented: "This agreement enables us to be competitive and meet the increasing communications requirements from the big multinational customers. Telefónica is a strong global partner with a good geographical fit to Telenor, and together we can offer a combined global footprint for our Scandinavian MNC customers."
Telefónica is one of the largest groups in the global telecoms market, with headquarters in Spain. It is listed on the main international stock exchanges. Including wholesale and enterprise services, the company has a presence in 25 countries, with more than 65% of its earnings coming from outside Spain.
Outlook and Implications
The agreement between Telenor and Telefónica will strengthen managed mobility solutions for multinational customers, expand the geographical scope of their service portfolio, and improve their interoperability and operational efficiency.
Telefónica’s strategy is to be one of the leading integrated telecoms operators in the world. The company's mid-term strategy, dubbed "Bravo!", was announced in March 2010. This aims at raising its worldwide customer base to 320 million by the end of 2012, up from the 265 million reported for end-2009. In addition, Telefónica wants to achieve market share of 30% in all the regions in which it operates. The strategic plan focuses on four key pillars—customer, offering, platform, and culture—and a major part of it is meant to facilitate Telefónica's push beyond traditional telecoms services.
Telefónica has already invested in emerging markets in Latin America, which will enable it to offer strong support to Telenor in these markets. In 2009, 48% of Telefónica’s capex was spent in this region, after it proposed a four-year investment plan for the region. Although capex targets in Latin America region have slowed down, the remaining potential of organic growth in these markets means that the investments have nonetheless been prioritised over Telefónica's operations in more saturated markets in Europe.
The deal is in line with the Spanish operator’s strategy of tapping into new growth opportunities through strategic and industrial alliances. It has in the past formed alliance agreements with other operators such as China Unicom and Telecom Italia (see China: 7 September 2009: China Unicom, Telefónica Deepen Strategic Alliance in Share Swap). The strategic alliance between Unicom and Telefónica is giving rise to the joint development of new services, entry into new businesses with global customer bases, and joint technology purchases.
Telenor is seeking to create opportunities in communications services, in particular through value-added services to support core voice and data services. It aims to leverage its key telecoms network, technology skills, customer base, and distribution strengths. The operator has also increased its presence in Asia and Central and Eastern Europe in order to manage operations in other markets. It has developed a common segmentation model that ensures diverse market needs are met. Both operators will benefit from Telenor’s process tools such as Mobile Market Offering, which is used for developing segmented go-to-market strategies.