Telefónica reveals global restructuring plan

Global telco to undergo wholesale changes to prioritise markets where it says it can be relevant and grow sustainably in the long term

Global telco Telefónica has announced a massive digital transformation to address what it calls not just a technology revolution, but also a social revolution that it believes will alter its immediate future.

The plan is to change the company’s corporate structure, involving: a focus on the key markets of Spain, Brazil, the UK and Germany; the creation of two new technology and infrastructure divisions; the operational spin-off of the firm’s Hispanoamérica business; and the redefinition of its corporate centre.

Going forward, Telefónica says it will focus on prioritising markets where it believes it can be relevant and grow sustainably in the long term, boost its growth potential while leveraging the value of its infrastructure, increase agility and improve efficiency.

Telefónica chairman and CEO José María Álvarez-Pallete said in a letter to shareholders: “In recent years, we have launched different initiatives to capture the benefits of digitisation, achieving important advances to date. Now, to become more agile and accelerate the execution of our strategy, we must evolve our operating model.

“Companies that do not assume their responsibility in this new world will cease to be relevant in the short term. Executives who are not committed to the long term and sustainability are not being responsible. It is up to us to envision, design and build the company we want to be in the future. And we have done so.

“We have envisioned it, we have designed it and we want to begin to build the path towards it. If, in the past, the low penetration of voice and data services assured future growth, the current maturity of the markets and the appearance of new competitors subject to different rules demand a highly focused strategic approach.”

Álvarez-Pallete said the new measures are expected to generate, among other effects, more than €2bn in additional revenues and a two-percentage-point increase in the company’s operating cashflow margin by 2022.

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Telefónica said its new Infra division has been created to bring together the company’s shareholdings in telecom infrastructure vehicles, serving third-party operators and incorporating partners. It will target digital businesses with high growth potential, aiming to become a key partner in helping other companies undertake their digital transformation.

The Telefónica Tech division will also aim to become a key partner in helping other companies undertake digital transformation, initially focusing on three businesses – cyber security, internet of things (IoT)/big data and the cloud, accelerate growth “exponentially” through more agile, efficient processes and the incorporation of new partners, the company said.

Telefónica Tech will integrate the business units currently dedicated to providing these services, to further focus management and achieve the scale to attract appropriate technology talent. The company said these businesses are already collectively growing revenues by more than 30% for the organisatiom and the aim is to boost this growth.

Telefónica said it would be open to acquisitions that complement its portfolio.

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