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Spotlight: New era for Spain's Telefonica

Xinhua, April 9, 2016 Adjust font size:

The Spanish leading telecommunications company and one of the largest telephone operators and mobile network providers in the world, Telefonica, has started a new era.

After a meeting of the Board of Directors on Friday, 72-year-old Cesar Alierta was replaced by 52-year-old Jose Maria Alvarez-Pallete, who became the new CEO of the company.

The new era for Telefonica is marked by the renewal that started with the resignation of four members of the Board of Directors on Friday, who will be replaced by other four: physicist Ignacio Cirac, vice-chairman of Banco Sabadell Javier Echenique, CEO of Iberostar Group Sabina Fluxa and Chairman of SULZER A.G. Peter Loscher.

Alvarez-Pallete, described by Alierta as the best prepared executive to deal with the challenges from the digital revolution, will have to deal with the clients' demands for digital content, competing with big internet providers and adapting the company to the new requirements of digital business, such as connected cars, the Internet of Things or mobile payments, among others.

According to analysts, Alvarez-Pallete will also have to manage the company's debt, which stood at around 49.921 billion euros (56.903 billion U.S. dollars) by the end of 2015, and the sale of its British mobile operator, O2, which would help reduce it, giving Telefonica around 10.250 billion pounds (14.488 billion U.S. dollars) according to economics newspaper Expansion.

Overseas, the new CEO will face the shrinking revenue in Brazil due to competitors and the local currency's drop against euro. Telefonica is the biggest European telecoms investor in Latin America, where it is the largest or second-largest carrier in many markets.

It also has other competitors in markets such as Mexico, Germany and Colombia where it is only working as a mobile operator. Some experts pointed out that the company will have to consider complementing it with fixed telephony services.

Meanwhile, Alvarez-Pallete reaffirmed on Friday 0.75 euros per share dividend. Alierta had said that this could be maintained for five or 10 years, however some sources said that this could be reduced.

Alierta has been a very important CEO for the company, he led a big transformation and helped build a network of international contacts that has had a positive impact on the company.

He took over the company in 2000, being part of Telefonica Board since 1996 and after having managed Spain's tobacco company Tabacalera SA.

The company went from operating in 11 countries to around 20, such as Brazil, Germany, Britain and China, where it has an agreement with China Unicom, a fact that boosted its internationalization.

Telefonica's clients grew from 68 million to 322 million in 2015 while profits grew from around 28 billion euros in 2000 to around 47.2 billion in 2015.

Alierta has been the longest-serving head of a major European telecommunications company and the oldest CEO of a company in Europe's Stoxx 50 index. Alvarez-Pallete's appointment represents a generational renewal for a new era of the company. Endit