Telefonica Reaches E-Book Deal With Planeta in Challenge to Amazon Kindle

Telefonica SA (TEF) teamed up with Grupo Planeta SA, Spain’s largest publisher, to expand its electronic book offers to rival Amazon.com Inc. (AMZN)’s Kindle device in the booming e-reader market.

Spain’s biggest phone company started selling the “Movistar Ebook bq” reading device last June designed together with Mundo Reader. Chief Executive Officer Cesar Alierta is bolstering Telefonica’s digital efforts through partnerships and products including mobile payment systems. Internet products are key to buoying profits next year, he said in an interview this week at the Mobile World Congress in Barcelona.

The market for electronic reading devices may grow from 11 million units sold in 2010 to 72 million in 2014, according to Mundo Reader. Movistar e-reader has a 6-inch (15 centimeter) display and sells for 169 euros ($227), or about 14 percent more than Amazon’s Kindle Fire tablet.

“Telefonica will provide the technology and distribution, while Planeta will offer the content,” Carlos Domingo, director of Madrid-based Telefonica’s product development, said in an interview in Barcelona this week.

Telefonica Digital

The offering based on Grupo Planeta’s content will initially be offered in Spain and later in Latin America, Domingo said. No date has been set for the release.

Amazon.com, the world’s largest Internet retailer, said Dec. 15 its Kindle Fire tablet, which sells for $199, was the best-selling product on its Website since its introduction 11 weeks before that. The Kindle Fire, which has a 7-inch display and runs on Google Inc. (GOOG)’s Android operating system, costs less than half the price of Apple Inc. (APPL)’s least-expensive iPad tablet computer.

Under the current agreement, Mundo Reader supplies electronic reading devices to subscribers of Telefonica’s Movistar mobile service.

Telefonica Digital, created in September and with offices in London, Silicon Valley (754895Q), Tel Aviv, Sao Paulo and Madrid, represents Telefonica’s efforts to pull together digital assets over three continents to take on Facebook Inc. (FB) and Microsoft Corp. (MSFT)

“We are preparing different projects using Spain as the platform to launch them,” Luis Miguel Gilperez, head of Telefonica Spain, said in an interview.

Apple Store

Family-owned Grupo Planeta is the biggest publisher in Spain and one of the seven largest in the word, according to the company’s website. It has more than 100 publishing imprints, encompassing all literary genres and a catalog of more than 15,000 Spanish and foreign, classical and contemporary authors.

Patrici Tixis, a spokesman for Grupo Planeta, declined to comment on the project.

Telefonica fell as much as 9 cents, or 0.7 percent, to 12.72 euros and traded at 12.74 euros as of 9:45 a.m. on the Madrid exchange.

Even as almost half of young Spaniards are unemployed, some technology products are thriving in the southern European country battered by the European sovereign debt crisis. Cupertino, California-based Apple is preparing to open a new flagship store in Madrid’s City center as sales of iPhones and iPads devices are surging in Spain.

While Telefonica’s e-book offering may help the operator to retain customers and boost average revenue per subscriber, the company needs to invest heavily into the service to challenge the incumbents in the electronic reading market, said Francisco Salvador, a Madrid-based strategist at FGA/MG Valores.

“Big players such as Apple, Samsung or Amazon are already well ahead, and customers usually prefer those cool brands,” Salvador said. “Telefonica will need a big investment.”

To contact the reporter on this story: Manuel Baigorri in Barcelona at mbaigorri@bloomberg.net

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

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