Businessmodel of Telefonica

Customer Segments

Telefonica has a mass market business model, with a multi-sided market. It mainly splits up its businesses by geography. Telefonica also maintains a different approach for its retail and corporate customers.

• Retail – Retail customers are segmented by regions, with each operational region being served by a different brand.
• Corporate – Large accounts are handled by the Telefonica brand, by its regional subsidiaries. Its corporate arm targets SMEs, Enterprises, and provides Wholesaling services.
  • For SMEs, Telefonica provides consulting and technological services to optimize firm operations.
  • For Enterprises, Telefonica provides communications consulting and infrastructure to improve both internal and external communications.
  • For Wholesaling customers, Telefonica provides global telecommunication services for fixed and mobile operators, ISPs and content providers. It also develops an integrated and competitive portfolio for carriers including Voice, IP, Capacity, Satellite, Mobility, Security and Digital solutions, and Platforms.

Telefonica also owns a number of other brands that represents non-key ICT related businesses. These brands are generally segmented by region.

Value Proposition

To consumers, Telefonica or one of its brands is a well-established telecommunication service provider – reliability is its selling point here.

Further, given the entrenchment of Telefonica in the markets it operates in, its telecommunications, particularly mobile and internet, coverage is unparalleled with international presence in over 40 countries and service reach in over 170 countries – thus service is another selling point.

Its size allows Telefonica to defray R&D costs and take advantage of economies of scale – it is thus able to offer services at lower cost to both consumers and institutional clients.

Telefonica also invests heavily in research and development and start-up funding, allowing it to stay on the cutting edge of technology. It also actively cooperates with other telecommunication service providers, further expanding its reach and thus value proposition.

Channels

For retail consumers, Telefonica and its brands use a combination of direct physical retailers and resellers. It also takes advantage of new technologies and uses digital sales channels and social media to reach out to current and potential customers.

Telefonica and its brands generally deal directly with institutional clients.

Customer Relationships

Telefonica relies heavily on culture-driven aspects of its product, i.e. its age, branding, and reputation, in order to sell its services to both retail and institutional clients. It also provides on-demand multi-channel support for its retail services.

A selling point of its institutional businesses, particularly Telefonica Business Solutions, is its 24/7 international service.

Key Activities

Telefonica’s key activity is the provision of telecommunication services for mobile, landline, Internet and television connections. It also provides business solutions to institutional clients through Telefonica Business Solutions or one of its other subsidiaries.

Key Partners

Telefonica regularly partners with other telecommunication service providers to provide service reach to countries within which it does not have a presence – for example in Asian countries generally. It also purchases equity stakes in telecommunication service providers in these markets – one example is China Unicom.

It also enters into technology sharing partnership – one example is its alliance with KPN, NTT DOCOMO, INC., Rogers, SingTel, Telstra and Vimpelcom in 2012 to share technologies to enable a global, unique seamless solution for the provision of communications to multinational customers requiring M2M devices connectivity.

Key Resources

Telefonica’s key resources are its technology, its built up presence in its operating regions – particularly the infrastructure (PPE) and licences that it owns, and its goodwill.

Cost Structure

Telefonica’s key costs are Supplies, Personnel, and Other expenses (primarily external services, including leases, advertising, and expenses to run its CSR arm, and taxes). See Table below for details.

Revenue Streams

Telefonica’s key revenue streams are from fixed line and mobile service sales, and B2B activities through Telefonica Business Solutions. Its main revenue generators are Telefonica Spain (25.6%), Germany (9.7%), Brazil (24.2%), and Hispanoamerica (33.3%).

Source of Revenue/Cost Revenue (FY 2015, million Euros) % of Total Revenue Revenues 47,219 100% Other Income 1,841 Supplies (12,910) 27.3% Personnel Expenses (9,800) 20.8% Other Expenses (14,936) 31.6% EBITDA 11,414 24.2% Depreciation and Amortisation (7,431) 18.0% Net financial expense (2,779) 5.5% Profit Before Tax 311 0.7% Profit For The Year* 2,880 6.1% *mostly profit from discontinued operations.