Telefónica Wins MNC Deal with Deutsche Post, Its New MNC Strategy Starts to Kick In!

| Jan 9, 2009 | Enterprise Mobility - Europe | Competitive Update

| Analyst: Rolf Schonhowd

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

January 7, 2009 –- Telefónica announces a win to manage Deutsche Post World Net (DPWN) communications services across 28 European countries (which 23 countries via partnerships) over the next five years. Telefónica becomes DPWN's prime telco provider in Europe, offering telecommunications services for 125,000 employees and 2,400 sites in Europe. The contract includes over 100,000 LAN ports, 60,000 fixed voice devices and 80,000 mobile connections with 24,000 mobile and smartphone devices. Estimated to be worth nearly EUR 350 million, this deal is Telefónica's largest pan-European combined fixed and mobile contract.

Analytical Summary

• Current Perspective: Positive on Telefónica’s EUR 350 million deal with DPWN, because it demonstrates that the company can outperform other key ICT players. In addition, as a fixed and mobile operator offering integrated services Telefónica seems to have scored high with DPWN in providing a new service management center in Prague. However, it remains to be seen if Telefónica can deliver and support such a comprehensive deal without much past experience in supporting MNCs with large cross-border requirements.

• Vendor Importance: High to Telefónica in Europe because the company needed to come up with a solid customer reference to gain further credibility in winning major MNC contracts. Supporting DPWN’s pan-European telecommunications activities as a single provider will definitively help building a reputation as a managed services provider. Hence, as long as the market perception at this stage has been that Telefónica was not yet up for the job it was critical for Telefónica to send out a positive message to both MNCs and rivals that it can offer competitive mobile, fixed and IT services in Europe.

• Market Impact: High on the European managed services and enterprise mobility markets as Telefónica is now a player to be reckon with and will likely be a major competitor for large fixed, mobile and IT deals Competitors such as BT Global Services, Orange Business Services, Vodafone and FreeMove will need to acknowledge that Telefónica Group is here to stay as a competitor targeting MNC accounts. Moreover, this event is likely to force some rivals into repositioning their MNC offerings against Telefónica.

CLIENTS ONLY

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Enterprise Mobility - Europe | More information
| Client access - Full report in Business Telecom Services - Europe | More information

Recommended Competitor Actions

• Orange Business Services needs to take more advantage of its fixed and wireless assets to deliver fully integrated fixed and wireless services. Business Everywhere and Unik need to offer clients a lower TCO and manageable communications spend. The other areas that the company should emphasize to clients include its unmatched IP/MPLS global network and local sales and support in 220 countries and territories (Telefónica’s MPLS footprint covers only 90 countries).

• In addition, FreeMove Alliance members need to leverage legacy fixed-line operations and offer a pan-European convergence solution to enterprise customers. With many existing business clients for its members’ individual fixed-line operations, the FreeMove alliance needs to exploit this customer base and differentiate their various services from those of Telefónica.

• T-Systems and T-Mobile ought to evaluate how its solid domestic business with DPWN (e.g. Germany) was not possible to be replicated on a pan-European scale. Critical questions to be raised are: Why DPWN did not see the value in T-Systems and T-Mobile International European footprint and presence? Could this deal have been won via its FreeMove alliance and its sister organizations such as Orange Business Services? Only through an honest evaluation can learning points and improvements be made to succeed at a later stage.

• The Vodafone Global Enterprise business unit should seriously consider partnering with a pan-European and global managed IP services provider to jointly target the MNC community with a one-stop-shop proposition. These initiatives can only strengthen Vodafone’s hand with enterprise customers. It appears that the company missed out on this potential DPWN deal due to some missing pieces in the puzzle.

• BT Global Services should look at how it can better communicate its enterprise mobility activities across Europe and globally. To counter and to downplay the threat from Telefónica, the company must promote more aggressively what it has delivered of enterprise mobility services. As BT is not a mobile operator per se (does not own mobile network infrastructure) BT Global Services will need to communicate fairly quickly that as a MVNO it can match a similar value proposition to Telefónica in Europe.

• All competitors (either European or US-based) such as Orange Business Services, AT&T and Vodafone must evaluate their ICT strategies and participate more fully when competing against Telefónica for large European MNC customers. All these rivals will need to acknowledge that Telefónica as a group is emerging a key competitor.

CLIENTS ONLY

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Enterprise Mobility - Europe | More information
| Client access - Full report in Business Telecom Services - Europe | More information

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