Telefonica to Invest US$14.7B in Brazil

By Anna Fitzpatrick, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Spanish telecommunications giant Telefonica has announced an increased investment of US$14.7 billion (R$24.3 billion) in the telecommunications network in Brazil. Starting this year through to 2014 the company is looking to consolidate their position in the competitive market. The announcement was made last week when CEO César Alierta met with Brazilian President Dilma Rousseff in Brasília.

Funds will be invested in upgrading and expanding communication networks, launching new products and services in telephony, broadband, mobile and cable TV, plus the acquisition of operating licenses. The company will also be investing in an innovation center in São Paulo, the company’s first outside Spain, a sign of how important Brazil is to the company.

In a statement Alierta said, “We are investing heavily in expanding our services and networks in order to cover nearly 100 percent of the Brazilian telephony and broadband services in fixed and mobile technologies.”

It seems to be a shrewd investment into the country with the largest amount of mobile phone users on the continent and where there is yet more potential for growth, especially in consumer spending. With huge prospective expansion in broadband internet too, this will be another key area of investment for Telefonica. The investment is a 52 percent increase on the US$9.6 billion that was invested by the company in the 2007 – 2010 period.

Since setting up the network in 1998, when state owned Telebras was dismantled, Telefonica has spent US$34.6 billion to date. In the state of São Paulo the company is the market leader in fixed land lines with 12 million customers. The company also has 3.3 million fixed broadband subscribers in that state, despite being blighted by technical problems and was forced to cease sales during expansion in 2009.

The mobile phone arm of the company, Vivo, has a market share of just over 30 percent, roughly 60 million subscribers. Vivo currently has the largest segment of the highly competitive market with Claro controlling around 25.4 percent of the market share and Tim with 24 percent. Both keen to make their mark on such a rapidly expanding area. Oi, is in fourth place with a 20.7 percent market share.

It was only last year that the company acquired full control of Vivo, after buying out Portuguese company Portugal Telecom. However, Telefonica’s deal to acquire full control of Vivo last year is considered by analysts to have cost over the odds. The company increased its original offer by €$1.8 billion over the three month long negotiation process.

Portugal Telecom now has a 25.6 percent stake in rival telecommunications company Oi, in which they invested R$8.32 billion recently. The stake is larger than predicted, and they are now expected to put pressure on Vivo.

With a presence in 25 countries across the globe, Telefonica is the only Spanish company in the Dow Jones Global Titans Top 50, an index of the world’s largest, most successful, global firms. Not only have they forged ahead as market leaders in Brazil but also in China with China UniCom. When the Chinese customer base is taken into consideration Telefonica has a 550 million plus client base making it the fifth largest telecommunications company in the world.