Raising money in Spain these days is not easy. The country has a 23 percent unemployment rate and according to forecasters will go back into recession in 2012, wiping out the small gains made in 2011. Necessary austerity measures will not help as they will discourage consumption. It is not the moment, therefore, for companies to be investing in activities such as motor racing sponsorship, even if this might help drive revenues up.
The situation is highlighted today by the results posted by the company’s telecommunications giant Telefonica, once a big player in F1. The company’s operating profits fell from €25.8 billion in 2010 to €20.2 billion last year. There might be plenty of money still coming in, but the timing is not right for the business to be splashing out, as jobs are being cut and mergers and acquisitions have been stopped. Revenues in Spain has reduced considerably, but the damage has been offset by growth in the company’s Latin American operations. The company’s share value has fallen 28 percent in the last 12 months.
and q the screaming…….
If i had an operating profit of €20 billion I would be splashing out…..
How about if you lost 5 billion?
And still had 20 billion left? No problem
forgot to add, they haven’t lost 5 billion, they’ve made another 20!
They didn’t lose 5 billion, they made 5 billion less profit. There is 30 billion between those two situations.
they didn’t lose 5B, they just made 5B less!
Which means the value of the company is down which means bonus’ and the like are down and so is the share price after the info is released etc….
They still have to run the company and attempt to get roughly the same results with less money.
Joe,
Does this imply that HRT is even more likely to stand for “Hopeless Racing Team”, especially now their chassis has failed another round of tests?
Wilson
Jesus. Quiet in Barcelona is it?
So, you think HRT will be a big success, right? XDDDDD
Jokes aside, do you think there’s a way to save the team? Or is HRT doomed?
I’m pretty sure this is not the right time to try a project like this in Spain. And it looks like they don’t have a clear idea of how to make it work.
With no high-performance car manufacturers and no F1 tradition, it looks a pretty risky bet to make.
I read elsewhere and noted here last year that cellular companies now consumed 2% of world GDP. Or maybe that was their capitalization. Anyhow a lot. Now, my apologies if that sounds pulled out of my derriere, but what is the cost of a cell plus landline plus broadband plus maybe cable? Now adjust for world income imbalances.
Maybe I’ll rephrase that: my working life has been characterized by a railroad style mania to build networks of often dubious value and highly variable reliability. (what good was GSM, once superseded? BT lost their research chief, when they had a good one, over his estimate every man woman and child needed to pay 60 GBP per month to pay off 3G.) Software companies who sell features not yet written . . a recent “startup” boomlet involving 20 somethings led by pied pipers making websites that do, well I am never sure exactly, you see, but somewhere like TechCrunch is a place to gawp. My web browser now is more lines of code than my operating system. At least 80% of the applications I use daily are free. (not complaining but must have cost bed and board at least to write these things) If all of this has changed the way we live, well that’s indisputable. But I wonder what the cost of it all has been. Yet somehow, well remaindered incumbent monopolies do very well for themselves. Should this blog be free, when I am paying someone else to read it? There’s some very messy questions posed by how it works. I’ve been asking them, but my naivete nurtured by being brought up to have a little faith in real progress made me ask all too quietly. Okay, made one or two sweet calls, but that’s it. We all suffer from varying degrees of hindsight, just saying i was more mis-focussed which is a little annoying. Okay, not as annoying as understanding what was going on and trying to raise capital for printing dead trees during the first internet boom!
Spain is sad, but Portugal is far sadder. The half life of an education minister there is measured in months. Young people simply aren’t getting educations of any kind. Over in oh so stable and sensible Germany, when I met my then girl’s brother, he was almost my age now, and getting his first job post study. I had a “lifetime’s” experienced compared with my considerably senior! How do they fund that? (currency arbitrage might be one answer, ask the Greeks)
I am screaming out to hire, but the insane legal and other liabilities and overheads of law and regulation mean I have to act like a multinational just to be a little shop. This is ironic, because my late partner moaned at me I always acted too big, my excuse was I was mimicking how the customers acted, but it was a poor one which often cost us. But had I not had my delusions, what chance then? What chance a green startup? (I mean the normal kind, not the sillycon valley* founder gets no equity has mean board kind)
*meaning the feint use of the phrase now diluted to homeopathic values.
The other day I said 40MM is naff all in advertising (but a start on a F1 budget) and I wrote that with some annoyance: all the numbers just got very big and actually to my mind intimidating. How do people psychologically deal with number shock, coming from barely making minimum wage? Disbelieve? Not comprehend? Gouge and cheat? I just had a almost argument, well a running simmering almost argument, pricing a sale which has been long delayed. Genuinely been told “no, not worth that much” and my answer is “nope, that’s cheap, our completion costs are blah blah and the market is thataway”. I have to bury my own number shock to price accurately.
Some mornings I want to scream Help!
The reason for this is that if I get past the whole quagmire of rules and whatnot to hiring, I know full well that after that there’s a genuine need to provide education, because none of what I see outside of the most valuable hard sciences has any use my way. That, and it’s hard switching from thinking that way to deal mode, which is still very much needed. Things might work out, but I see abundant potential for Allmighty cockup.
Oh, what the heck, no choice but up and on. Just keeps me awake at night.
There is a flip side to all this telecoms revolution: most public services cannot be accessed without an internet connexion. Most public access is unsafe, or scarce, or intermittently available, or all of that and expensive. The telcos have become a tax on living. I don’t actually want to hear them sponsoring F1, I want them renationalized. If we are going to have a burgeoning youth in poverty who cannot afford access to the modern world, and hence law, advice, reading, opinion and essential government functions, then I don’t think commercial telecoms is any longer justifiable. (fortunately I no longer sell many ads in this space, though i am cutting my nose here)
I have recent first hand experience of what improvements, slow but definite, a old laptop and a wireless card do to someone who lost their way. So please forgive me my position, just it’s not new. In fact, all those people banging on like idiots about aspects of technical design for websites, and universally ignored, have been arguing it takes a different way of thinking to provide workable services over the internet. Only now, now it is almost all of it there and only there, still no-one listens. Govvy departments don’t get competition from new ventures. Big banks or almost any bank, neither. No-one noticed the barbarians at the gates, because they were too happy profiting from the futile slingshots.
Footnotes: I cannot see half my telcos services via their website. Anyone who uses online banking knows that unhappy feeling. Royal Mail suspended a online stamp system many businesses rely on, after months of denying it never worked and stole random sums from credit cards. Ad nauseam. This is not a revolution, just a exercise in duping the next lot. Hence Telefonica can make their profits. I don’t want such unclean money in F1. I just opened a wound, I know. But there is a correlation between deadbeat incumbents and big branding. I think ultimately it gives the wrong impression. Choose your least liked utility, put them on a car, and would you not occasionally want to swear at the thing?
I omitted to point out that vast amortized losses in the internet and telco game have already socialized the infrastructure costs, so being made to pay twice starts off a persuasive argument for nationalization. This is not philosophy, this is about averting illicit taxation.
So very tempted to post TL;DR…
However that was fascinating to read. Truly.
if you could TL;DR me, i’d pay for it, Steve. Not kidding. My customers would probably tip you too! j
“If we are going to have a burgeoning youth in poverty who cannot afford access to the modern world, and hence law, advice, reading, opinion and essential government functions…”
Too true. Although the desire/need so many people have of progressing within the industry i.e. owning an iPhone, all the apps etc loving it and then being a proud owner is beyond sickening. It’s a tool and the more someone thinks of it, the more the owner is…a marketing tool.
Funny, I’d have thought the opposite. With clear profits still in excess of 20bn surely Telefonica is perfectly placed to wipe its opposition off the map? They still have a huge slab of cash spare (so long as the shareholders can be persuaded) so if it were me in charge I’d be carpet bombing the media and squeezing the alternatives into the shadows as they either lack the cash or the will to invest in marketing in “these troubled times” (copyright, every tired hack on a tight deadline)…
Joe,,
Where´s the money in Spain?
This would take up pages and pages but let´s just point out ,a tiny part of where exactly that Spanish money is..
SANTANDER ,, a sponsor with the Ferrari Team and has been a driver´s sponsor for the Mclaren drivers,a personal sponsor to Pedro Martinez De La Rosa,,being known as one the FIVE biggest in the WORLD,,14000 branches in 40 countries and 80 million customers….
FERROVIAL Spanish Company having main base operations in the UK and Spain (Amey-Cespa-Ferroser)..The following Airports being under the Ferrovial banner;Heathrow,Stansted,Glasgow,Aberdeen,Southampton,Edinburgh..
But as I mentioned before this is just a tiny part of exactly where that money is……
Great the future of HRT is assured then.
Maybe no one wants to invest in what is seen as a cluster-****
Hate to mention it but Santander has not been doing too well.
Yes, and they have been involved in some pretty shady car loan/repo scam type stuff here in the US of A. They aren’t big as a bank here, but they have been actively buying car loans and some other consumer debt stuff. Their modus operandi has been to (falsely) claim payments were not made and then repossess the vehicle; there have been numerous cases where the car owner had cancelled checks in hand but Santander would still claim the car. Their reasoning was that electronic copies or xeroxes of the checks or payment statements were invalid but they would refuse to meet with the customer; Santander then kept the car. An interesting approach to banking. I don’t think I will ever do business with them!!
There’s a customer-satisfaction poll in the UK that Santander have come bottom of every year since they’ve operated here.
Some money must still be there….I wonder how much Telefonica are spending on their Volvo 70 round the world campaign….3 leg wins so far. These boats and crews don’t come cheaply!
compared to F1 they do
The cult of ‘Free Ride-isms’ is among us.
Everyone wants everyone else to make payments to them.
Next we’ll see the gasoline industry get demands that they pay car manufacturers fees because car manufacturers were responsible for the gasoline industry’s success. We see this madness now in North America with Cable/Telco giants demanding fees to run other peoples TV content even though they have protected markets. Just the sort of mob like shake downs that Bernie invented…
We don’t create real goods any more in Western nations – we leave that dirty work for the 2nd and 3rd world to do and there after we complain about job losses…
We run around filling our lives with non-tangible products that at the end of the day we could really do without in the big picture scheme of food in our bellies and a warm dry roof over our head. Everything else is consumerism.
Ok… back to my current crisis of why my Twitter search function can’t find my own account.
Wasn’t Telefonica heavily involved with F1 sponsorship back in the 90s? Minardi and Marc Gene….why did they bail out?
Answered your own question there I think…
Possibly because while Minardi were lovely people, they never looked like winning anything. Your sponsor needs you up front, crashing or being controversial to get the cameras on you.
JV, well said.