July 6, 2016 / 9:32 PM / 2 years ago

Telefonica Brasil sees digital revenue outpacing overall sales growth

SAO PAULO, July 6 (Reuters) - Telefonica Brasil SA , the country’s largest telecom operator, sees revenue from digital services growing faster than overall sales as the company moves away from a model based on offering voice and internet connection.

The Brazilian unit of Spain’s Telefonica SA says revenue from digital services including video streaming and cloud storage already represented 1.9 billion reais ($569.24 million) in 2015, or about 5 percent of net revenue.

That reflects rapid growth for a segment that “started from scratch” less than three years ago, according to Ricardo Sanfelice, the division’s recently appointed vice president.

If trends continue, voice revenue should continue shrinking as a share of revenue from around half currently to about a quarter of sales in five years, Sanfelice told Reuters in a telephone interview.

Digital services at Telefonica Brasil grew 15 percent last year, he said, outpacing overall revenue growth of 5 percent. Although he declined to give firm forecasts, Sanfelice said “there is no reason” for digital services not to keep expanding at the same pace.

Last week Telefonica Brasil announced the creation of a specific division to develop services including music streaming, cloud storage and data protection applications for personal and corporate users.

The division also invests in startup companies linked to the telecom sector, giving them $50,000 and business support to develop new ideas, Sanfelice said. Telefonica is currently investing in 13 Brazilian startups with an eye on growing sales from innovation.

The focus on digital services follows high-profile criticism from Telefonica Brasil Chief Executive Amos Genish aimed at tech companies offering over-the-top services using telecom networks without facing the regulatory burden on operators in Brazil.

Genish had especially harsh words last year for messaging app Whatsapp, owned by parent company Facebook Inc, which he accused of competing with traditional text-messaging services while using cell numbers paid for by operators’ regulatory fees.

$1 = 3.3378 Brazilian reais Reporting by Ana Mano; Editing by Tom Brown

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