Latin America accounts for almost half of Telefonica’s revenues

Latin America accounts for almost half of Telefonica’s revenues

Telef贸nica just published its results for the first nine months of the year, and they aren鈥檛 great; the Spanish telco giant reported a 429m euros loss in Q3, the first one in nine years according to reports.

However, a detailed look at the number also reveals that Telef贸nica can still count on Latin America, and comes as a validation of the new strategy and internal organization the company recently unveiled.

Targets maintained despite weak results

Although results were weaker than expected, analysts had anticipated that Telef贸nica would report losses for the last trimester, due to its difficulties in its home market and to its layoff plan. Affecting no less than 6,500 employees these redundancies led the company to provision 2,591m euros for indemnity costs during the last quarter.

However, Telef贸nica is still reporting increased revenues for the first nine months of the year: 46,6 billion euros, 5.4% more than in 2010. Although net profits are down, this led the company to reiterate its guidance for 2011 and confirm its shareholder remuneration policy. In other words, the telco聽is still convinced it will be able to hit its earning targets for 2011, and it鈥檚 the message the company wants to send to the financial markets.

Latin America,聽Telef贸nica鈥檚 main growth engine

Although it鈥檚 too early to tell whether Telef贸nica will reach its financial goals for the year, what鈥檚 interesting to note is how important Latin America has become for the company. Indeed, revenues in the region have increased 18.1% year-on-year, making up for lower contributions from Telef贸nica Espa帽a and聽Telef贸nica Europe.

Revenues from Telef贸nica Latinoam茅rica now account for 46% of its total consolidated revenues, 鈥5 percentage points鈥 more than in September 2010, according to the company, which describes Latin America as its 鈥溾漨ain growth engine鈥.

Within the region,聽Brazil is Telefonica鈥檚 main market, 鈥渁ccounting for 50% of revenues in the first nine months of the year.鈥 Indeed,聽Telef贸nica is a market leader in Brazil, following its acquisition of a 50% share of the operator Vivo last year.聽According to Telef贸nica, its next-largest markets by revenue after Brazil are Argentina (11%), Chile and Venezuela (8%), and Peru (7%).

On a global level, he company is now responsible for 鈥300 million accesses鈥 (including fixed and mobile telephony and Internet accesses). Latin America represents a great market opportunity in this respect, as Internet and mobile penetration still have considerable room for growth (see our posts about Internet in Peru聽and in Mexico).

Not surprisingly,聽Telef贸nica Latinoam茅rica鈥檚 customer base grew 9% year-on-year in the region; the company now manages 鈥渁 total of 194.9 million accesses in Latin America鈥.聽The company is particularly betting on the strong growth of smartphones (see our post about Smartphone Usage in Brazil), which will translate in data contracts for operators.

Supporting the Latin American startup scene

As you can imagine,聽Telef贸nica didn鈥檛 wait for these results to take note of the importance of Latin America for its business. This led it to take a series of pro-active steps to support and foster the local tech ecosystems.

Indeed, the company is sponsoring many events across the region, from huge gathering such as Campus Parties to smaller ones such as the new Hackathon we mentioned yesterday (see 鈥Brazilian accelerator Appies announces its first hackathon for apps鈥).聽Telef贸nica is also supporting competitions such as the AppCircus, as well as co-working spaces such as the Movistar Innova Center in Chile (see our post 鈥11 Latin American co-working spaces you should try out鈥).

Besides sponsoring, one of the most interesting of Telef贸nica鈥檚聽initiatives is Wayra, its newly created聽startup accelerator聽for Spain and Latin America (see our in-depth report about Wayra鈥檚 launch in Colombia). Since its start, Wayra has received over 5,000 applications in the countries where it has already rolled out its call for applications.

According to reports,聽Telef贸nica is now ready to take things one step further and invest between 400 and 600m euros in startups next year, using Wayra for its venture capital deal flow. Besides its positive impact on the early stage capital market, this move would also be a confirmation of Telef贸nica鈥檚 view of startups as a digital innovation source for the group. Indeed,聽as the company already acquired the VoIP company Jajah and the Spanish social network Tuenti, which are now managed from London by its new聽Telef贸nica Digital division.

What do you think of 聽Telef贸nica鈥檚 prospects in Latin America?

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