Telefonica unveiled a massive transformation of its business, planning to spin-off the vast majority of its units in Central and South America to focus on core markets of Spain, the UK, Germany and Brazil.
Sweeping changes to the composition of the operator group also include the creation of specific technology and infrastructure divisions, and targeting perceived growth areas including IoT and cybersecurity.
In terms of its geographic footprint, Telefonica will up investment in the four core markets, with plans to be “more ambitious” and make a “major effort to improve customer experience”.
The company’s operations elsewhere, covering Argentina; Chile; Peru; Colombia; Mexico; Ecuador; Uruguay; and Venezuela will be moved into a new standalone business, with all individual divisions subject to a business review.
Telefonica chairman and CEO Jose Maria Alvarez-Pallete (pictured) said its traditional growth trajectory in these countries no longer beat inflation with the company exposed to volatile currencies, uncertain regulatory environments and competitive pressure.
He added: “we can’t bring about growth the way we’ve being doing it”, noting Telefonica would assess divisions with a view to potentially “combining them” or “reducing our position in Latin America”.
Earlier this year the company announced it was offloading a number of units in Latin America to America Movil and Millicom, with some of the deals still undergoing the regulatory and divestment process. These were not included in its revised business plan.
In addition to transforming the make-up of its regional operations, the operator unveiled a new Telefonica Tech division focused on developing products in the B2B segment covering cybersecurity, IoT, Big Data and cloud.
It will also create a specific infrastructure strand housing a range of assets, starting with its majority stake in tower subsidiary Telxius.
With the split of the company into its main operation, tech and infrastructure divisions, Alvarez-Pallete said it was “adapting the role and operation of the corporate centre” to simplify the business and eliminate inefficiencies.
In a statement to shareholders, Alvarez-Pallete said: “We must recognise that the model that has allowed us to get this far successfully is close to being exhausted.”
“Companies that do not understand that the world is changing, socially, technologically and economically, are destined to disappear. Companies that do not assume their responsibility in this new world will cease to be relevant in the short term.”