Telefónica and ZTE to Launch "Movistar" Handsets in Latin America

Telecoms giant Telefónica and Chinese equipment provider ZTE announced yesterday that they have signed an agreement for the development of a complete range of mobile handsets that will be distributed exclusively in Latin America under the "Movistar" brand name. The handsets, which have been co-designed by ZTE and Telefónica Latinoamérica, will be launched throughout 2010 in Mexico, Colombia, Venezuela, Peru, Ecuador, Argentina, Uruguay, Chile, Guatemala, El Salvador, Panama, and Nicaragua.

According to Luis Miguel Gilpérez, mobile business director of Telefónica Internacional, "Consumers in Latin America are becoming increasingly demanding and have specific requirements in terms of handset design and desired features. By customising a complete range of handsets, ZTE will enable Telefónica to meet the requirements of its Latin American customers and further build the Movistar brand."

Outlook and Implications

• Growth Opportunities: The chairman of Telefónica Latinoamerica, José María Álvarez-Pallete, recently highlighted, during a public speech, the strategic importance of the region. According to the executive, Latin America is the region where the operator sees the greatest growth potential, particularly in the mobile phone and mobile internet segments, which have been rapidly expanding thanks to the availability of new technologies and applications. Telefónica expects that average mobile penetration levels for the region will reach 110% in 2014, from 90% in 2009, and that mobile broadband penetration will multiply by five (see Latin America: 17 February 2010: Telefónica Sees Growth Opportunities in Latin America).
• Reinforcement of Movistar Brand: This launch will help Telefónica to reinforce the Movistar brand across the Latin American region. The Spanish operator announced in October it was adopting the Movistar brand as a unique denomination to represent its products in all its Spanish speaking markets. These changes mainly affect the operator's fixed telecoms and Internet services, which will adopt the "Movistar" denomination followed by the name of the technology: Movistar Banda Ancha for ADSL services; Movistar Línea Fija for residential voice services; and Movistar Televisión for television services. The process, which has already kicked off in Chile, will be progressively adopted in Spain and all its Latin American businesses with the exception of Brazil, where the operator will continue to use the "Vivo" brand. In the rest of Europe Telefónica will adopt the "O2" brand, already present in the United Kingdom, Germany, Ireland, and the Czech Republic (see Chile: 28 October 2009: Telefónica's Brand Unification Kicks Off in Chile).
• Cold Feet in Colombia: Telefonica said earlier in 2010 it was looking for growth opportunities in Colombia, where is considering acquiring a stake in municipality owned Empresa de Telecomunicaciones de Bogotá (ETB). The Spanish operator currently provides mobile services to 87% of its population and fixed-line coverage to 998 municipalities representing 90.9% of the country. The telecom does not yet have nationwide fixed-line coverage and with the acquisition of operators in Cali and Bogota would gain access to two of the most populated areas. Local press reported last week that negotiations were in an advanced stage and that the operator could be willing to offer 700 million euro (US$962 million) to acquire a controlling stake in the operator. Álvarez-Pallete confirmed this week Telefónica's interest of Telefónica in ETB but denied rumours over the alleged offer, saying that an offer would not be made until the future shareholding structure for the company were clarified. Spanish Financial El Economista, citing unnamed sources, said today that Telefónica could be considering withdrawing from the negotiations as conditions for the agreement do not satisfy its expectations. ETB is not the only investment opportunity considered by Telefónica, as the telecoms unit of municipally owned multi-utility Empresas Municipales de Cali (Emcali) is also looking for a strategic partner.