Telefonica Sees Digital Revenue of 5 Billion Euros by 2015

Telefonica SA, the Spanish phone company reeling from declining revenue at home and competition from discounters, forecasts its digital business will generate annual sales of about 5 billion euros ($6.2 billion) by 2015.

Sales from Telefonica Digital, created in September 2011 by combining digital assets on three continents, including social-networking site Tuenti and Web-phone platform Jajah, will increase 20 percent a year from 2.4 billion euros in 2011, the Madrid-based company said in a statement today.

“The forecast for digital isn’t easy but I think we can get it,” Chief Executive Officer Cesar Alierta said today on the sidelines of an investor event in London. In February, Alierta said the unit “will see significant growth as we take new projects next year.”

Telefonica is using its digital unit to gain revenue from additional services and stem the defection of users switching to competitors. The company doesn’t plan to dispose of any digital assets, said Matthew Key, Telefonica’s digital chief.

Alierta and Key were at the event to present forecasts for digital assets for the first time. Key ran Telefonica’s European mobile-phone operations before Alierta put him in charge of the digital businesses, which include Terra, a Sao Paulo-based Internet portal offering free and subscription-based videos in Latin America and the U.S.

Latin America

Digital-services growth will be helped by Telefonica’s presence in 25 countries, especially its position in Latin America, and its 309 million customers, as well as partnerships with companies including Telecom Italia SpA and China Unicom (Hong Kong) Ltd., according to a Telefonica presentation.

The digital services are “already delivering growth levels well in excess of market norms,” Key said in the statement.

Telefonica’s digital push includes machine-to-machine services, which it predicts will add 500 million euros to 800 million euros in sales by 2015. Other areas of the digital business include financial services and advertising in Latin America and Europe, which Telefonica forecasts will generate 800 million euros to 1.1 billion euros in sales by 2015.

Telefonica’s digital assets will have a “tremendous positive impact” on earnings and will help improve user loyalty and market share, Alierta said at today’s event.

Telefonica shares fell 1.1 percent to 10.36 euros as of 3:03 p.m. in Madrid, valuing the company at 47.2 billion euros.

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