Strategic Partnerships Will Drive Growth
Russia's MegaFon has partnered with Spain's Telefónica to enable it to benefit from better buying power and technical knowledge provided by the Spanish operator. The deal is part of Telefónica's Partners Program which also includes China Unicom and Telecom Italia . The deal enables business clients of both companies to benefit from access abroad, helping to build stronger ties with major enterprise clients. BMI believes the partnership will bring benefits to both companies as costs are lowered and products expanded.
One key part of the agreement will see shared equipment purchasing, boosting the purchasing power of both companies. With operators committed to rolling out new infrastructure to meet subscriber demand or regulatory requirements, the deal has long term potential for both companies in reducing costs and ensuring their networks remain competitive. As the larger player, Telefónica has plenty to offer MegaFon given its presence in 19 markets compared with the Russian operator's two.
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However, MegaFon's position as one of Russia's major players will be strategically useful to Telefónica's corporate clients. In subscriber terms, consumer connections provide the bulk of revenues and growth for operators. Nevertheless, corporate clients offer stable revenues and higher average income per user, making these a key target segment for operators.
The long term view for the plan sees the companies jointly launching new services and products such as OTT, cloud services and M2M, although concrete plans have not been made. BMI believes the joint focus on such services will provide strong support for the companies' growth plans as strategies move towards products that can be offered alongside existing connectivity services. Joint procurement and development will see both players reduce costs as markets face saturation and limited expansion options.
There is little in common between Telefónica's predominantly Spanish speaking operations and Russia's focus on its own network, meaning there will likely be little cross over content. This is largely true of fellow partners China Unicom and Telecom Italia. However, joint development of services should allow the companies to keep ahead of their rivals with the latest launches maintaining their competitive edge. BMI believes strategic partnerships focusing on content will become increasingly common across the global telecoms market.