Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Telefonica: Not Just a Reign in Spain

The iPhone 5 launch on Wednesday, Sept. 12 is sure to be the most important event for tech investors this year. The Motley Fool will be hosting a live chat where our top tech analysts will answer your questions and break down what the announcement means for Apple and tech investors everywhere. Be sure to swing by at 12:45 p.m. EDT next Wednesday for all your coverage of Apple's next big announcement.

Telefonica (NYSE: TEF  ) has certainly felt the effects of Spain's struggling economy, and the country's unemployment rate of almost 25%. With such a weak consumer base, the company decided to suspend its dividend payments, a move the former monopoly has not had to make since the Spanish civil war in the 1930s. Telefonica's share price has dropped 38% in less than a year.

Seeing the handwriting on the digital wall
Despite having telecom investments in parts of the world that haven't been hit as hard by economic misfortune, Telefonica has decided to gaze a bit further into the future, looking at how it could compete in the mobile advertising and online payments markets against the likes of Facebook (Nasdaq: FB  ) and Google (Nasdaq: GOOG  ) .

To that end, the company is putting together a network of venture capital firms, called Amerigo, which will invest in digital start-up companies. The first investments will be made in Spain, Chile, Brazil, and Columbia, where those start-ups would receive some governmental funding.

Tasked with managing the Amerigo investment funding network, and given near-autonomy, is Telefonica's year-old Digital division. Telefonica Digital has already generated $3 billion in revenue in 2011 and plans on more than doubling that by 2015.

The Digital division has already made "direct to bill" agreements with Facebook, Google, Microsoft (Nasdaq: MSFT  ) , and Research In Motion (Nasdaq: RIMM  ) , enabling Telefonica customers to pay for services from those customers through their phone bills. This is significant in areas where credit card use is not widespread, such as in Latin America.

Pensar diferente
Telefonica Digital chairman and CEO, Matthew Key, said in a statement, "We have long understood that to succeed we need to understand ... the digital innovation ecosystem, recognizing that great ideas can come from anywhere." Even "outside of the main centres of venture capital activity, such as Silicon Valley and London."

Does Telefonica rate a thumbs-up in CAPS? I think it does. The company is profitable, and its P/E is under 4. And regarding that suspended dividend, Telefonica said it would reinstate it for 2013, though it will be paid in shares, not cash. Furthermore, the company has global investments and does not have to rely on a quick turnaround in Spain for its survival.

If Telefonica can make inroads into Facebook's advertising revenue stream, what would that mean for Facebook? For a thorough discussion of the pros and cons of investing in Facebook, this premium Fool report is a must-read. Get it here .

Fool contributor Dan Radovsky has no financial interest in the above-mentioned companies. The Motley Fool owns shares of Facebook and Microsoft. Motley Fool newsletter services have recommended buying shares of Google, Microsoft, Apple, and Facebook. Motley Fool newsletter services have also recommended creating a synthetic covered call position in Microsoft and a bull call spread position in Apple. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that
considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (1) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 12, 2012, at 3:00 PM, alexanderantonio wrote:


    after reading some of your other 'constructive comments' like this one, I've come to the conclusion that you have a full life of happy poor days ahead of you. Maybe you should start taking advice from others on this website instead of blasting off on Apple.


    Great article, it seems as though TEF is still beaten down greatly and still a great play. Reminds me of Ford back in 07 and 08.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2009438, ~/Articles/ArticleHandler.aspx, 10/24/2016 11:32:18 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:04 PM
TEF $9.94 Up +0.08 +0.81%
Telefonica CAPS Rating: ****
BBRY $7.35 Down -0.02 -0.27%
BlackBerry CAPS Rating: *
FB $133.28 Up +1.21 +0.92%
Facebook CAPS Rating: ***
GOOGL $835.74 Up +11.68 +1.42%
Alphabet (A shares… CAPS Rating: *****
MSFT $61.00 Up +1.34 +2.25%
Microsoft CAPS Rating: ****