It's certainly being buffeted by the southern European financial crisis, but in parallel with predictably gloomy results, the Spain-based telecoms giant is showing all the signs of a major strategic re-think. By Ian Scales.
Instead of just getting out the lawyers and huddling defensively in federation with the other big telco players as competition sweeps in from the Internet, Telefónica has been going over the top (OTT) with a series of new initiatives. And in doing so it's breaking ranks with the rest of big telco and using its OTT capabilities and Europe-wide network footprint to wholeheartedly attack the market and its fellow-telco's customer bases.
First the results: Telefonica's first quarter net profit fell by 54 per cent to €748 million this quarter, dragged down mostly by Spain's recession which squeezed the group's European revenues by 6.6 per cent. Telefonica also wrote down the value of its 10 per cent stake in Telecom Italia (also buffeted by the European financial crisis) to €337 million - now valued well below the €2.3 billion originally invested in 2008.
The group's Latin American business and its overall global mobile broadband business made up for the revenue shortfall, with Latin America posting an increase of 8.3 per cent and mobile broadband 15.4 per cent, neatly offsetting the revenue declines in Europe.
Today, in what appears to be a "good news/bad news play" for the financial markets on news of fairly dire results, Telefónica has broken ranks to a certain extent (having been arguing, with the other Euro telcos against over-enthusiastic regulation) to offer what it calls a standard pan-European data roaming tariff.
Its smartphone customers are to get 25MB of data usage in all 27 European Union member states for €2 a day (UK users enjoy £1.99 per day).
Telefónica says this translates to 250 visits to essential websites like Facebook, Twitter or Google and up to 500 emails.
Customers will only pay for days they choose to use data, and claims it's fraction of the new price caps announced by the European Union yesterday which specify that as of 1 July, one data megabyte should cost no more than 70 cents, or €17.50 for 25MB.
On a per megabyte basis, Telefónica's tariff works out considerably cheaper: but then this is a per-day rate and many users will use much less on any given day so it's not as brilliant a deal as the headline would have users believe. The idea is to compete with WiFi providers as well as to win PR brownie points in the run-up to the European summer holiday season.
But the real strategic change concerns Telefonica's apparent readiness to come out of the traps with OTT services, not just to counter Skype and WhatsApp but to win customers from other telcos. This is its solution to the industry's prisoner's dilemma - to spill the beans before it's 'friends' do.
This week Telefónica Digital, Telefonica's London-based innovation arm, announced TU Me, an unashamedly OTT rich communications app designed to offer the equivalent of WhatsApp, Skype and Viber but still tied to the subscriber's telephone number. The app is initially free (some sort of charging mechanism might be added later).
The app is initially available for iOS only, but naturally there's an Android version in the works and, one wonders, whether there will eventually be a Web App version as well to be on-hand for Telefonica's Firefox browser-phone development (also announced at MWC and covered by us - see below).
Two surprising things about TU Me. First , it's available to all smartphone users, as was Telefonica subsidiary O2's Mobile Wallet announcement last month (see - O2 breaks ranks, gets its wallet out and goes OTT
), and secondly that it sits right on the territory marked out for Telefonica's rich communication services (RCSe) collaboration Joyn, announced by Telefónica and the other big Euro-tels, also at MWC.
Has Telefonica given up on RCS and such telco federation efforts in favour of just going OTT and winning as much as it can, or is it just hedging its bets?
See our video below from MWC this year - Firefox on why its collaboration with Telefonica could create a new smartphone environment.
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