Telefónica talks tough, looks to Latin America

Latin America should remain Telefónica's growth engine in 2009, in spite of increasing signs of a deep economic slowdown on the continent, Julio Linares, the company's chief operating officer told the Financial Times.

Linares said its extensive Latin American operations were expected to generate double-digit revenue growth this year and that it had identified scope for cutting costs, mostly in Europe and in particular its home market of Spain. He also said that the company was confident it would hit the targets it has set for earnings, despite some analysts expressing doubts about this.

He declined to comment about the possibility of Telefónica's sharing radio access networks with Vodafone, as reported in all the countries they both have operations in - Germany, UK, Spain, Ireland and the Czech Republic.

Telefónica's biggest Latin American business is in Brazil, where the economy shrank by 3.6%, a record amount in the last three months of 2008. Linares claimed Telefónica's Brazilian business had not so far been affected by the downturn, and predicted strong growth in 2009: about 22% of the population does not yet own a mobile phone.

Telefónica has a 5.4% stake in China Unicom and Linares said the two companies were discussing the possibility of jointly purchasing mobile phones, to secure bigger discounts with handset makers.

The Spanish group became Telecom Italia's largest shareholder in 2007 to stop América Móvil, the Latin American mobile operator controlled by Mexico's Carlos Slim, buying a stake in the Italian company.

The FT points out that Telefónica paid the equivalent"‰of €2.80 per share for its 10% stake in Telecom Italia whose shares were trading at €0.90 on yesterday. Telecom Italia reported falling revenue and earnings for 2008 last month. Linares expressed confidence in Telecom Italia's CEO, Franco Bernabè, and the recovery plan he has put in place.