Bloomberg News

Telefonica Aims to Complete Review of Internet Assets Early 2012

November 30, 2011

Nov. 23 (Bloomberg) -- Telefonica SA, Spain’s dominant telecommunications company, aims to complete a review of its online assets such as social-networking site Tuenti and the Jajah Web-phone unit early next year.

Telefonica Digital, created in September as part of a reorganization, will decide whether to retain or build out assets in markets such as Spain, where it is struggling to stop customers from switching to cheaper rivals, Matthew Key, chief executive officer of the digital business, said in an interview. Madrid-based Telefonica will consider equity investments, partnerships and ventures to bolster the business globally.

“What we have done is getting our arms around what this is and that’s a process that I suspect we’ll be doing over two or three months,” Key, 48, said at Bloomberg’s London offices yesterday. “By February next year we’ll be pretty clear about where we should be focusing.”

The digital unit, with offices in London, Silicon Valley, Tel Aviv, Sao Paulo and Madrid, represents Telefonica’s efforts to pull together digital assets over three continents to take on Facebook Inc. and Microsoft Corp. Telefonica this year folded its shrinking Spanish unit into a European division and is slashing jobs, halting major mergers and acquisitions and identifying underperforming assets that can be divested to cut debt and stem a 22 percent slide in the stock this year.

Media Review

Telefonica is running a separate review of its media assets, including Imagenio, an online TV service in Spain, and some Latin American channels, Key said.

“Some of them will have an investment implication,” he said, adding that no decisions have yet been made.

Key, based in London, previously ran Telefonica’s European mobile-phone operations, before Chairman and CEO Cesar Alierta put him in charge of Web businesses such as Tuenti, the Spanish social-networking site with 12 million users, and Terra, a Sao Paulo-based Internet portal offering services including free and subscription-based videos in Latin America and the U.S.

Jajah, the Mountain View, California-based Internet-phone company acquired in 2010, “is closer to our core skills set,” Key said in the interview.

Telefonica shares fell 1.1 percent to 13.26 euros in Madrid yesterday, giving the company a market value of 60.5 billion euros ($82 billion). Its 22 percent decline this year compared with 7.3 percent drop by Deutsche Telekom AG and Vodafone Group Plc’s 1.3 percent increase. Bonn-based Deutsche Telekom is Europe’s largest phone company by revenue.

Mastercard Venture

Yesterday, Telefonica and MasterCard Inc. agreed on a venture to allow mobile-phone customers in Brazil to make purchases, money transfers and bill payments. Earlier this month, Telefonica set up a partnership with Quantenna Communications to gain access to technology for home video services.

Key declined to give financial forecasts for Telefonica Digital. The executive formerly worked for companies including Vodafone, the world’s biggest mobile-phone operator, and Coca- Cola Co., the largest soft-drink maker.

“It will be a voyage of discovery,” Key said.

--Editors: Robert Valpuesta, Kenneth Wong

To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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