Informe de Banda Ancha en Argentina 2019-2024
Thursday, November 28, 2019

The arguments that Álvarez-Pallete did not give

It was a hotbed in Latin America when Telefónica arrived in the region 30 years ago. Therefore, it is difficult to understand the argument of its executive president, José María Álvarez-Pallete, in the sense that the region is unstable and for that reason they will only concentrate their growth, development and investment efforts in Brazil, Spain, Germany and the United Kingdom.

Telefónica entered Latin America by buying cheap state-owned companies that, by the way, were behind in their investments and in their technology. And, for example, within a few years of arriving in Argentina that operation represented about half of the Ebitda of the parent company. And Telefónica expanded thanks, in part, to the profits that turned from the region. It was not the Potosí silver, but the contribution was important. The proof of this strengthening is that at the beginning of the 21st century, Telefónica's share was trading at more than 22 euros, about two-thirds more than at present.

Today the hotbed is the world, not just Latin America. Britain is on the subject of Brexit; In Germany, Telefónica has just sold Next, specializing in Big Data, although the announcement is that the Spanish company will try to expand on digital issues; In Brazil, Claro acquired Nextel for more than US $ 800 million, which will allow it to compete better in the local market; In Spain, beyond political avatars, Telefónica has to hold its flags before entering the market of Más Movil and Euskatel and will lay off 20% of its workforce.

Telefónica begins its path to stop being a global company to become a European company. Perhaps the deadline for this transformation is 2022, date mentioned by Álvarez-Pallete as the time to increase its revenues by € 2 billion and two percentage points of improvement in the operating cash flow margin (OpCF).

The interesting thing to note is that the new HispAm unit will have a CEO, Alfonso Gómez (currently responsible for Hispam Norte), but will depend on the General Directorate of Finance, which in the international organization chart is led by Laura Abasolo. The CEO is closely linked to operational issues, but in the last year he was the protagonist of the sale of the stakes in Central America, the restructuring of its activity in Colombia and the agreement with AT&T in Mexico so that Telefónica of its services through the Yankee company network (neither company has done very well in the country in its competition with the powerful América Móvil). Gomez will manage alliances, synergies mentioned by the CEO, and also possible disposals of the company's interests in the eight countries of the region. Abasolo will be your supervisor and will have the direct line with global driving, in addition to the margin you have in your decision making

In 2011 Telefónica had a debt of € 60,000 million. Today he reduced it to about € 39,000. The value of the company on the New York Stock Exchange is almost similar to that of its debt. The share is quoted by JP Morgan at € 6, beyond what the markets say. So far in 2019, Telefónica's share lost 12% of its value: and Latin America is to blame, according to Alvarez Pallete.

It may be that the big rudder that yesterday's announcement represents is a dramatic warning that Telefónica is being sought to be cleaned up. But the company should take care of its mistakes in the management of the region instead of blaming the region for the state of its accounts, when it was the region that gave it the best milk if historical accounts are made. Eight years ago, Telefónica offered 100 Mbps connectivity in Madrid and 1 Mbps in Latin America was its massive offer.

In the Telefónica region it invested, but not enough. He did not know what the potential demand for fixed broadband was, because he concentrated on mobile operation and was late to the fiber: that is one of the mistakes that can be considered key. And from the perspective of the region, it can be said that much of what was produced in it was not reinvested in those territories, but was used in global expansion at the time or in markets considered with a greater future, such as those that now prioritizes the driving of Telefónica.

The subject, as Álvarez-Pallete mentions it, is the high requirement of continuous investment for a market that is increasingly complex, more competitive and in which the old telecommunications companies see reducing the value of the main good they sell and is of your property (bandwidth, for example): it is becoming more expensive and leaves less value added, which is usually from another company, for example, from Disney in the case of pay-TV services.

Telefónica's global results for the first semester in each of the regions in which it had its operation divided are the following in figures expressed in Euros: North Latam, 1,985 million; Latam Sur, 3,355 million; Brazil, 5,030 million; Germany, 3,564 million; United Kingdom, 3,411 million; Spain 6,283 million (of which almost a third invested in restructuring, which includes the aforementioned dismissals) and other operations, 493 million.

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