Analysts at investment bank Jefferies have given an upbeat assessment of Telefónica’s prospects and has suggested that concerns about aggressive football promotions having a detrimental impact are overstated.
According to Jefferies, Telefónica’s response to intensifying competition has been rational, with less aggressive discounting in response to Orange and its low-cost brand Jazztel’s moves to acquire football subscribers.
Jefferis noted that Telefónica had introduced discounts “far below” those of last year and contended that Telefónica’s Fúsion offerings were “appealing enough to continue adding new and retaining current customers, despite a significant price premium vs competitors’ bundles”.
Jefferies said that Telefónica’s more limited promotions “underline its focus on delivering the promised growth acceleration in 2H, rather than aggressively going after the remaining – and likely lower-spending – football customers at Vodafone”.
Both Telefónica and Orange have in recent times aggressively targeted Vodafone customers interested in football, following Vodafone’s decision not to license football from Telefónica because of the high price demanded. Both players now face competition from Mediaset España’s just-launched OTT TV service Mitele Plus, which also offers La Liga football. However, Jefferies contended that Mitele’s offering’s price is relatively high and noted well-publicised concerns about the quality of the service following its launch.
Jefferies also said that Telefónica’s segmentation of its consumer tariffs had protected it from low-cost disruptor MásMóvil as well as Orange. The analysts said that Orange’s residential business faced more of a challenge from MásMóvil and Vodafone’s own low-cost Lowi brand, with the operator relying on wholesale revenues to maintain its top line.
Jefferies gave Telefónica’s stock a buy recommendation on the basis that tariff options for its football fans combined with the intrinsic strength of its multi-play and TV offerings for high-end subs would protect it from further price competition and enable it to deliver its second-half guidance.