The Korea Trade Investment Promotion Agency (KOTRA) invited Kim Faura I Batlle, director general of Telefonica S.A., to Korea on June 25th and 26th to meet with several Korean business leaders in the field of IT. Mr. Faura was able to answer some questions on the second day of his visit.
Faura comes from Barcelona, Spain, and has an extensive history in the Spanish telecom industry. He was president of Terra Lycos for many years, and then when that company was merged with Telefonica he was hired on as Director General and given responsibility of the Catalonia region, which accounts for 205 of the telecom business in Spain itself.
Telefonica is an international telecoms giant with a presence in twenty-one countries in Europe, South America, and Asia. Kim Faura spoke about this by saying: "In the number of customers we are third in the world; the first two are both Chinese companies. In terms of value we are also 3rd in the world; the first is AT&T and the second is Vodafone." He compared his company to others by saying that Telefonica has a lot of room to expand. While other businesses are concentrated in a single country or area, Telefonica has a significant market share in several markets. It is the ideal partner for a company looking for a consistently expanding customer base.
Mr. Faura said that he came both as a representative of Telefonica, the telecommunications giant based in Spain, and as the President of the Bilateral Commission of Korean-Spanish Businessmen. His Korean counterpart is Mr. Park of Doosan. He mentioned: "As the head of the bilateral commission I should be seeing a lot of different companies in a lot of different fields."
He noted that in Spain the number of applications that a company can provide to its broadband, fixed line and mobile customers is a huge competitive advantage.
"Because today applications of different companies can affect the decisions of consumers. Something that Vodafone does not have one side can be a huge competitive advantage," he mentioned.
Interest in an acronym soup
The Director General spent the first day in Korea visiting several well-known Korean IT and communications companies.
He spoke about this by saying: "In the morning we had a meeting with Hanaro. Hanaro is an interesting company from a lot of points of view. But one of them is that they do have an interest in IPTV. Their IPTV project is not a project but a reality with 100,000 users." Telefonica is also very interested in setting up a thriving IPTV industry, and currently has 500,000 IPTV customers in Spain. The company is very interested in exchanging more ITPV technology with Korean firms. "Our platform is a little different. What they have is a buffer and a disk with some capacity. I think we can share many things," said Kim Faura. He went on to say that Korean technologies are basically more advanced than their Spanish counterparts, "so we saw a mix of companies that were showing us other technologies that can work with the limitations of our technology in Spain." In the afternoon he visited many other companies including Minigate, Infraware, Point I, and also the research center ETRI.
He went on to explain that on the first day he was in the hands of KICA, and the second day he would be in the care of KOTRA. He planned to visit many other Korean technology companies including Com2uS, a mobile game company, SK Telecom, KTF, and Daum. He mentioned that he had previous business with Daum by saying: "When I was president of Terra we sold them Lycos in the States. I think that was a good deal for Lycos."
The Director General also admitted a strong interest in finding out more about Korea's fast and ubiquitous broadband infrastructure. "Well first in the fixed line [segment] having 100 mbps is unbelievable because we have 3 mbps for households in Spain," he said. "We need 6 mbps for the project of IPTV so there is a limitation of the quantity of houses that we can cover in the project." Kim Faura was also interested in WiBro technologies. "With WiBro technology you can have as much as 7 mbps running in a bus, a car, and we don't have this in Spain yet." He mentioned that there is an offering of HSDPA which provides up to 3.6 mbps but it is only half of what WiBro can do.
Poised for investment
Telefonica itself is constantly expanding and improving its markets to meet demand that other companies cannot. Mr. Faura cited a recent example in the Brazilian market. He said that Telefonica recently acquired one of the three major telecom companies in Brazil.
"They had a waiting list of six years when they were putting in lines and they had 4 million lines that were waiting to be installed," he explained, "In 20 months we installed 3 million of the lines and in 2001 we were finished. What we had to do was a lot of investment."
Telefonica's quarterly report outlined this in a more concrete manner.
Telefonica Group results for the first quarter of 2007 once again showed Telefonica as the best combination of growth and returns in the European industry. The basic net profit per share amounted to 0.260 euros, 6.1% up yearon- year. This year-on-year growth rate in the basic net profit per share has been produced in a consecutive way since the period January-September 2004.
At the same time, there was also a simultaneous year-on-year growth in revenues (+15.1%), OIBDA (+9.6%), OI (+15.0%) and net profit (+7.7%) in nominal terms. Once again, since the period January-September 2004, all of these captions in the profit and loss account have grown simultaneously every quarter to date.
The constant focus on growth can be seen through the 7.8% organic growth in revenues during the first three months, thanks to the successful integrated management of operations that translated in a significant growth in customers and the services usage. It is worth highlighting that the organic growth of revenues has been over 7.5% every quarter since the first quarter of 2004.
Synergies obtained, cost optimization and already achieved geographical diversification have reinforced the generation of Operating Cash Flow (OIBDACapEx) up to 3,718 million euros, a 10.8% increase year-on-year.
The Telefonica Group continued, through a high commercial effort, to maintain high growth rates in terms of customers in markets where it operates, thus strengthening its competitive position.
Hence, total accesses were in excess of 206.6 million by the end of March 2007, up 11.4% year on year. This variation is due mainly to cellular and broadband connections and extended product bundles that include voice, broadband and television. Telefonica Espana contributed 44.8 million to the total number of Telefonica Group accesses (+5.5%year-on-year), Telefonica Latinoamerica with 117.0 million (+14.1% year-on-year) and Telefonica O2 Europe with 39.2 million (+7.8% year-on-year).
With regards to cellular business, the Telefonica Group has focused its growth efforts on the capturing, loyalty and retaining its best customers. Hence, Telefonica Group cellular accesses stood at 148.9 million by 31st March 2007, 13.4% higher than in March 2006 due to the increased growth of Telefonica Latinoamerica where they totaled 85.6 million (+15.6% year-on-year). In Spain, the total number of customers increased a remarkable 7.6% year-on-year to stand at 21.8 million in a market that now has eight operators. In Europe, customers rose to 35.9 million, 9.4% up on cellular connections in March 2006.
