Telefonica unveils operational overhaul; plans to spin off Hispanoamerica businesses

28 Nov 2019

Madrid-based telecoms group Telefonica has unveiled a five-point ‘action plan’, which CEO Jose Maria Alvarez-Pallete says will serve as a catalyst for the company’s future transformation. Going forward, the group lists its key objectives as follows:

· To prioritise Spain, Brazil, the UK and Germany, as key markets in which Telefonica can provide differential value to its customers and grow in a sustainable manner;

· To work towards an operational spin-off of its businesses in Hispanoamerica;

· To launch a new Telefonica Tech unit to boost B2B growth in areas with greater potential (i.e. IoT, Big Data and Cloud);

· To create a Telefonica Infra unit, to leverage the strength of its Telxius assets and develop alternative models of infrastructure deployment; and

· To evolve its operating model to increase agility, speed up execution and maximise synergies between all Telefonica units.

The most eye-catching aspect of the plan is the decision to spin-off its Latin American businesses (excluding Brazil) and Alvarez-Pallete writes: ‘Until a few years ago, our operations in Latin America were the driving force behind the company’s growth. However, the particular conditions in these markets have had an impact on the business, reducing its contribution in recent years for various reasons (macro and regulatory environment, greater competitive pressure, insufficient scale or volatility of currencies), and despite the enormous efforts of our local teams, which have always shown a strong commitment. This situation has led us to adopt a new model for these operations, which will now be managed as an autonomous unit with a dedicated team. With this step, we begin the review of our portfolio of assets in Hispanoamerica, with the dual objective of modulating our exposure to the region, while creating the conditions to maximise its value, both via growth, consolidation and potential corporate operations.’

Alfonso Gomez, currently responsible for Telefonica’s ‘Hispam Norte’ cluster, will lead the new Hispanoamerica unit. He was responsible for the recent wholesale deal with AT&T in Mexico, this year’s sale of Telefonica’s Central American units and for the successful restructuring of Colombia Telecom while he was CEO. The unit will comprise Telefonica’s operations in Argentina, Chile, Peru, Uruguay, Colombia, Mexico, Ecuador and Venezuela.

Telefonica is confident that these measures will generate more than EUR2 billion (USD2.2 billion) of additional revenues by 2022.