MasterCard sees deal with Telefónica paying off in long term - CEO

Thursday, February 3, 2011

US global payments company MasterCard (NYSE: MA) expects that its recently announced 50-50 joint venture with Spanish telecom operator Telefónica (NYSE: TEF) to develop mobile financial solutions in 12 countries in Latin America will take some time before it starts generating profits, CEO Ajay Banga told a conference call.

"They are investments. This is not the kind of thing that pays off on day one or quarter one, or even in some cases even in year one," he said.

Banga said the JV will make money in two ways for MasterCard: the company's share of net profits from the JV will appear directly in the revenue line, "but the other side is when people use existing MasterCard phone factors to spend, and that gives me another stream of revenues that will show in the company's regular business line."

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"Both are going to be very interesting. With the partnership with Telefónica I get to reach both sides of the revenue streams. I am hopeful I will get some initial benefits from the existing MasterCard consumers, but reaching to the unbanked and to provide for financial inclusion has a longer-term angle to it," Banga said.

"The bigger question to me is, I don't know which way mobile payments will develop, but I know they will develop. [...] In the developing world, it may be that SMS-based, mobile commerce, mobile payment gateway-based systems may become more interesting," he said.

"All I'm determined to do is be part of the mobile ecosystem, to help drive it and to help to drive the value generation of that. I don't want to stand on the sidelines and watch."

The JV is aiming to provide 87mn current and potential Movistar customers with mobile payment services before the end of the year. Movistar is the brand with which Telefónica does business in Latin America.


MasterCard saw fourth quarter gross dollar volume in Latin America hit US$66bn, up 20% in local currency terms and 22% on a constant currency basis compared with 4Q09, according to the company's latest earnings release.

Purchase volume in Latin America was up 25% to US$38bn through 626mn transactions, with cash volume growing 13.9% to US$28bn, both in local currency.

There were 127mn MasterCard-branded cards in circulation in Latin America as of December 31, rising 4.1% from the same time in 2009.

MasterCard saw worldwide net income rise 41% in the fourth quarter to US$415mn, or US$3.16 per share, beating Wall Street's expectations of US$3.03 per share, as net revenue climbed 10.7% to US$1.44bn.