IHS Global Insight Perspective | |
Significance | Movistar Venezuela has confirmed it will continue investing in the country to reinforce its network and increase its product portfolio. |
Implications | This investment is in line with its current marketing strategy, which is aimed at attracting high-end customers. |
Outlook | Movistar Venezuela is expected to continue focusing on its data business, particularly mobile broadband. |
Movistar Venezuela, owned by Telefónica, has confirmed it will invest 1.5 billion bolívar fuerte (US$349 million) in 2010 to reinforce its mobile network and promote new products and services in Venezuela, Agencia EFE reports. The president of Telefónica Venezuela, Juan Antonio Abellán, said during a press conference in Caracas that the Spanish operator has already invested 3 billion bolívar fuerte in the country over the last three years. The executive also announced that the company has created a new data and innovation division that will be in charge of developing new products, such as voice-to-text for SMS services, phone back-up, and account management services. The new unit will be headed by Gustavo Reyes.
Movistar's capital expenditure for the first quarter of 2010 totalled 59 million euro (US$72.8 million) and was mainly directed towards improving coverage and continuing the rollout of GSM and 3G networks, as well as satellite TV services. The company reached 11.8 million accesses at end-2009—10.5 million were mobile, 1.2 million were fixed-wireless, and 62,800 were pay-TV.
Outlook and Implications
- Country Strategy: Movistar Venezuela is the country’s second-largest telecoms operator, offering mobile, fixed voice (fixed-wireless), and pay-TV services. Its marketing strategy is focused on increasing loyalty and high-value customers through a selective customer acquisition policy. The operator’s mobile customer base contracted over the last 12 months, reaching 10.3 million mobile customers at the end of March 2010, 4% less than in the previous year due to slower commercial activity and higher churn in the pre-paid segment. This decrease was partly compensated by an increase in the number of contract customers by 7.2% year-on-year (y/y). The number of fixed-line wireless subscribers at the end of the same period reached 1.2 million, down 9.4% y/y, while pay-TV subscribers increased to 68,700 from 23,400 y/y. Mobile ARPU continued to register a solid performance, improving 23.3% y/y in the first quarter in organic terms, supported by the positive performance of the data business, particularly mobile broadband, and the evolution of customer revenues with smartphones.
- Fraud Accusations: Venezuela's National Assembly confirmed on 10 May 2010 its intention to file a lawsuit against Movistar Venezuela for fraud and poor service. According to Angel Landaeta, the chairman of the Assembly's Subcommittee on Public Services, "Movistar increases its rates continuously without consulting users ... in violation of the Law on Protection of Persons in the Access to Goods and Services." Landaeta did not give any details of the legal action to be taken. Digitel, which is facing similar accusations, could also be sued by the government. This is not the first difficulty to hit the Spanish operator in Venezuela of late; the devaluation of the bolívar earlier this year impacted on Telefónica’s results (see Venezuela: 12 January 2010: Telefónica Reiterates Guidance After Venezuelan Devaluation). In 2003, the government introduced strict controls for the repatriation of funds, forcing companies to exchange funds at a bolívar:US$ rate less favourable than the official exchange rate. Since then, Telefónica has been unsuccessfully negotiating the repatriation of US$2 million in profits at the official rate.