Pyramid Points - Telefonica Climbs the Mobile Value Chain
  Pyramid Points
M2M cloud platforms accelerate MNO's time to market for valued added services
October 15, 2014
Apple Watch Overcomes Design Challenges, Sets New Standard for Functionality
September 16, 2014
The Swiss army knife framework for CapEx optimization
February 15, 2014
Implications of the Google-Lenovo Deal
February 12, 2014
Cisco and NEC optimize telco cloud delivery for small and midsize businesses
January 16, 2014
4G unveiled in China, but China Mobile still has work to do
December 11, 2013
Orange Dominicana by the numbers
October 25, 2013
Colombian Reversal Clause Unlikely to Slow 4G Buildout
September 19, 2013
Microsoft - Nokia & iPhone 5c: What Do They Mean for Smartphone Trends in Emerging Markets?
September 17, 2013
Is the Arab World Ready for OTT Video?
September 13, 2013
Turk Telekom bid for Digiturk is a strategic gamble
August 2, 2013
Before and After the App Store: The Changing Fortunes of Mobile Operators
July 24, 2013
In 4G Auction in Colombia, New Entrants Responded to Government Efforts to Foster Competition
July 15, 2013
Telefonica sale in Central America does not point to regional repositioning
June 5, 2013
Emerging markets to drive cellular M2M
May 22, 2013
Orange plans MVNOs to address new markets
May 9, 2013
What Apple needs to do to make China its No. 1 market
April 24, 2013
Chinese Regulator Opens Up to MVNOs
March 15, 2013
CDNs Offer New OTT Revenue Hope
February 20, 2013
Airtel Rethinks Its African Approach
February 12, 2013

          Print        Email         Bookmark and Share

Telefonica Climbs the Mobile Value Chain

February 4, 2013

Last month, Geeksphone (a Spanish smartphone manufacturer), Telefonica and Mozilla introduced to developers two Firefox OS-based smartphones, Keon and Peak. What attracted less attention in the otherwise typical announcement was the presence of Telefonica, a global giant with revenue of US$84bn, operations in 25 countries around the globe, and 314 million subscribers, in this partnership of relative rookies.

This move presents yet another example of the Spanish company’s aggressive efforts to redefine its position in a mobile value chain increasingly challenged by OS players, device manufacturers and Internet companies.

Telefonica has come a long way. Faced with the weaker performance of its European operations, increased competition, the prospect of slowing growth in its Latin American stronghold and tighter margins, the company has gone on the offensive in a hardcore search-and-destroy mission, taking the following key steps:

  • It restructured its European operations, particularly building on its successful operations in Germany and the UK. The hope is that this restructuring may ultimately decrease the dependence of its “aging European parents” on their “Latin American children.”
  • It cut smartphone subsidies in a number of countries, a move which, while causing short-term losses (e.g., between December 2011 and September 2012, Telefonica lost 1.2 million postpaid mobile customers in Spain), has revitalized the operator’s European margins.
  • To mitigate the impact of the subsidy cut, it introduced a handset financing scheme and a quadruple-play service offering in Spain.
  • It created a global resourcing unit to increase its leverage in negotiations with device vendors, and Telefonica Digital to drive innovation in the digital arena.
  • In response to the rising threat of OTT providers, Telefonica launched its own messaging and voice OTT service, TU ME, a service good enough to more than hold its own in a competitive OTT space.

Telefonica’s partnership with Mozilla and Geeksphone follows the same pattern. Rather than merely complain about the outsized power of Android and iOS, the company is leveraging its scale to do something about it by injecting additional competition into the OS market.

At the end of 2011, Telefonica went to war against its declining margins, the underperforming economy in Europe, competition from OTT service providers, overdependence on certain OEMs and saturating markets. Initial results have been promising: Telefonica Spain’s OIBDA margin has increased by 5 percentage points between Q1 2012 and Q3 2012, exceeding 47% at the end of the period (see Exhibit). Perhaps more importantly, the operator is demonstrating to its peers that mobile operator disintermediation need not be a foregone conclusion.

Exhibit: Telefonica’s OIBDA Margin in Spain, Q1-Q3 2012

Telefonica Climbs Mobile Value Chain

Sources: Telefonica, Pyramid Research

— Stela Bokun, Senior Analyst

Related resources:

Pyramid Research Smartphone Forecast
Forecast published quarterly
The Smartphone Forecast tracks annual handset sell-through of total mobile handsets and smartphones for a ten-year period including five historical years and five forecast years. Smartphone sell-through is segmented by vendor and by operating system. Granular data is provided for each of more than 50 countries, making Pyramid’s smartphone forecast the most detailed on the market today.

Smartphone Operating Systems: Ecosystem analysis and trends shaping the future of the global smartphone market
Thematic Report published July 2011
In this report, Pyramid Research analyzes the current state of the smartphone market segment, focusing specifically on the developments taking place in the OS arena.


 Latest Research
Thematic Reports
  FTTH/B Deployments in Asia Pacific
  Devices for the Wrist
  Mobile Data Pricing: Innovative Practices to Drive Adoption and Traffic
  LTE Business Models: Best Practices in Network Deployment, Positioning and Service Pricing
  The Personal Cloud: A Strategic Imperative for Operators
  More Reports
 Telecom Insiders
  Cellular M2M Services in Africa & the Middle East: Market Sizing, Forecasts and Case Studies
  M-Commerce in Sub-Saharan Africa: Making Sense of a Growing Mobile Business
  Cellular M2M Services in Latin America: Redefining the Role of Mobile Operators
  Mobile Broadband in Africa and the Middle East: LTE Profit Drivers and Outlook
  Market Opportunities and the Evolution of MVNO Business Models in Western Europe
  More Insiders
 Country Intelligence Reports
  Romania: Network Improvements Enable Multiplay and Multiplatform Services to Drive Telecom Market
  Canada: Data Segment to Boom after LTE Spectrum Allocation
  Italy: Mobile Broadband Drives Telecom Market Growth as M&A Activity Intensifies
  Paraguay: LTE Deployments and Nationwide Fiber-Optic Backbone Rollout Will Boost Data Consumption
  Finland: Growing Demand for New and Innovative Data Services Drives Operator Transformation to All-IP
  More CIRs
 Market Forecasts
  Fixed Communications Forecast
  Fixed Operator Marketshare
  Mobile Operator KPI
  Mobile Data
  More Forecasts
  Terms and Conditions      |      Privacy Policy      |      Copyright © 2014 Pyramid Research. All rights reserved.