Keynes's prophecy enters Telefónica

MadridMarc Murtra, president of Telefónica, is known to have a devotion to English authors and readings on history, economics and political philosophy. as the ARA explained in a profileFrom there, to what extent has the British economist John Maynard Keynes inspired the new roadmap of the telecomWe don't know. But what became clear last week, while Murtra was presenting the strategic plan for the next five years, is that this is an author who has not gone unnoticed by the Catalan executive when it comes to planning, and therefore outlining, the path he wants the company to follow. telecom From now on.

"Keynes said that in the long run we are all dead," Murtra paraphrased the British economist as he outlined the roadmap to analysts, investors, and the media. But the reference to the British economist didn't stop at quoting one of his most famous phrases. The Catalan executive also explained his interpretation: "[Keynes] meant it as a tool," he said, emphasizing the need to act in the short term and focus on present actions: in this case, the things Telefónica can already begin to act on. Although focusing solely on the short term is also "comfortable," Murtra added, thus connecting, still under Keynes's influence, the most immediate action with the future possibilities—the long term—that the company has, even though they haven't yet materialized and considerable uncertainty remains. This is the delicate balance of the plan presented by Murtra.

"The main problem [Telefónica has] is that, despite having excessive debt, this hasn't allowed it to grow, but only to maintain its position. [...] It has invested repeatedly, but not to earn more, and the traditional model has ended up being unprofitable," points out a source in the sector. Among the things Telefónica wants to act on immediately is precisely to reduce its debt. "It's better to move away from debt. [...] When you have such a high level of leverage, you can't make optimal decisions, and this affects the short term," argued the top management of the telecom During the presentation of the plan.

This move, however, is not painless, as Murtra himself acknowledged. In fact, the executive pointed out that addressing the debt will involve going through difficult times, both in terms of explaining and understanding, Murtra said. In this context, Telefónica has begun its exit from Latin America by divesting its subsidiaries there. It has also announced a dividend cut in 2026, which has resulted in one of the most severe stock market punishments in recent years, with a drop in share price of more than 13% on the day the plan was presented. Market sources also interpret this "scared-out" reaction as a reaction to a company that has been characterized by distributing a stable dividend.

The top management also didn't rule out implementing a workforce reduction plan (ERE) and spoke of a "radical" simplification of the group. In any case, it's what's necessary to be able to look to the future, the company maintains. In this regard, Murtra didn't hesitate to correct the course of past times when Telefónica had shown "an aversion to making difficult decisions," he stated during the plan's presentation to the media.

And the future?

What connects the short term to the long term is, among other things, revenue. Murtra promised investors an accelerated rebound. Telefónica aims to increase its revenue by between 1.5% and 2.5% annually during the period 2025-2028. From 2028 to 2030, the goal is to achieve growth of between 2.5% and 3.5%. "It seems like a small amount, but for a stagnant sector, it's a lot," reflects the same source mentioned earlier. This is one of the elements, though not the only one, that should allow it to grow: financing diversification and greater scale; two objectives that the plan pursues and about which unanswered questions still linger. "If it doesn't, the traditional [telecommunications] sector will die," the same source concludes. That's why investors with an industrial perspective will be key: from SEPI, the Spanish government's investment arm, to Criteria.

Regarding diversification, Telefónica has set its sights on the defense business, specifically cybersecurity. However, amidst the ongoing European rearmament, other companies have already begun a long-term effort in the same direction. "Perhaps Telefónica won't develop specific systems, but it could become a necessary supplier for a company in cybersecurity matters within the communications sector," say industry sources. It is also eyeing artificial intelligence. "The big question is how to monetize the anticipation you generate," adds the same source.

Finally, Telefónica is cautious about how it will gain scale, that is, what kind of mergers and acquisitions it intends to lead. Last Tuesday, Murtra only referred to discussions in all "major markets," but did not set any timeline for when a consolidation operation might take place. However, he did provide a figure: the potential for synergies – cost savings – would be between 18 and 22 billion. This is the positive side of the long-term forecasts, but there's also a negative side, at least as far as investors are concerned: a capital increase as a means to reach the target.