Page 473 - Business Principles and Management

Unit 5

Focus On...

Business Innovation–Banks Team with Telecoms

Today many banks view the world as their market, and competitive
barriers are fast disappearing in the Internet age. Bankers in Europe,
for example, are now buying, merging, or partnering with major
banks in other countries within the European Union and beyond.
Some are also partnering with companies not typically considered a
part of banking. For example, Spain’s Banco Bilbao Vizcaya Argen-
taria (BBVA) developed an e-commerce partnership with the giant
telecommunication company Telefónica. The stock value of both
firms zoomed upward. BBVA is a major financial player in Europe
and Latin America whose global leadership has been recognized by
top financial publications. In 2000, it was chosen World’s Best Bank
(Forbes) and Best Bank in Spain (The Banker). In 2001, it was named
Best Bank in Latin America (Forbes) and Best European Bank (Lafferty).
It is now expanding into the United States. In 2005, BBVA acquired
Texas-based Laredo National Bank. In 2006, it acquired Texas National
Bancshares and State National Bancshares to become the fourth-
largest bank in Texas.
Why would a bank and a telephone company team up to play in
the world market? Cell phones with Internet access are becoming a
primary means for consumers to gain instant access to business infor-
mation and services. They may also become a primary means of deliv-
ering banking services. The phone companies possess both cable lines
and excellent computer systems. Banks provide banking services and
the telephone companies deliver the services electronically to world-
wide customers.
Other banks are seeking telephone company partners. Germany’s
Deutsche Bank, for example, is becoming an all-Europe e-commerce
bank by linking with mobile-telephone provider Mannesmann. The
Bank of Scotland and England’s Halifax Bank have both teamed with
the telecommunications company BT Cellnet. It is expected that the
worldwide competition in banking e-commerce will grow more
intense, with more and bigger players every year.
Think Critically

1. If you owned stock in Citigroup, a large U.S. bank, and it
signed an agreement with a foreign cell phone company to
compete with European banks, would you sell your stock,
take a wait-and-see attitude, or buy more stock? Why?
2. What might go wrong with these joint international banking
and telephone deals, especially if telephone companies know
little about the banking business and banks don’t know the
telephone business?

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