More volume and new businesses: Telefónica draws an ambitious future

MadridTelefónica had a strategic plan until 2026, but the uproar at the top, marked by the change of president this past January —Marco Murtra took over from José María Álvarez-Pallete–, has caused the horizon of this roadmap to end prematurely. This coming November 4th, the first telecom The State will celebrate its Capital Markets Dayand will present, along with the results of the first nine months of the year, the main lines of the new direction it wishes to follow.

In the new strategic plan, scale is expected to play a key role, that is, the size of the company, but also the diversification of the business and the rethinking of the markets in which it operates. This has already been evidenced by the farewell in many Latin American countries, while focusing on Europe. All of this should serve to outline an ambitious future, or at least that's how it intends to present it, but also to turn the page on two years in which Telefónica's shareholder structure and governance have dominated the headlines—whether due to the entry of the Saudi group STC; the entry of the state 27 years after its privatization; or the increased influence of CriteriaCaixa.

Competing with the US and China

The telecom It is firmly in their minds that the only way to compete with the giants of the United States and Asia is through consolidation. In other words, growth. In fact, this is also advocated by the two main associations in the sector at the European level: the GSMA and Connect Europe.

Telefónica's chairman, Marc Murtra, has used every intervention to emphasize this: "We need a single market for telecommunications operators in Europe," he argued during the 40th Meeting of the Economic Circle. To achieve this, both sides are looking directly to the European Commission. Business consolidation has always been under the watchful eye of the EU executive regarding its impact on competition, but in a context of European rearmament and the promotion of strategic autonomy, Brussels has committed to reviewing the guidelines that regulate business concentrations.

For the moment, the president of Telefónica has managed to win over some voices within the Spanish government to this demand, a significant consideration considering that SEPI, the state's investment arm, controls 10% of the company. "We need scale," argued the Minister for Digital Transformation and Public Service, Óscar López, at a briefing luncheon last week.

One of the uncertainties surrounding this desire is where to start growing. Cross-border mergers with other European partners don't seem easy, and Murtra himself has indicated that they must first look at the countries. In this regard, rumors have been circulating for some time about Telefónica's possible interest in Vodafone Spain, now in the hands of the British fund Zegona, although Murtra himself has described this as "speculation." In any case, there are also other avenues for growth, unrelated to direct competitors, among players with different interests.

From technology to cybersecurity

This growth is seen by Telefónica as a condition sine qua non to invest, especially in the current context. The Old Continent's goal of becoming stronger and ceasing to depend on other powers is a goldmine for the company to diversify its business. "We want to invest in defense," Murtra anticipated in an appearance before the Congress of Deputies. But defense is very broad and, in the case of telecommunications, The interest is in technology and cybersecurity, a sector in which a shower of millions is expected for a market that is now very fragmented.

It must be taken into account that the telecommunications European companies have been pushing themselves to look beyond the telephony business for years. "It was quickly clear that the competition was Google or Apple, meaning that the important thing wasn't the tube through which the data passes, but the data itself. These giants force operators to invest heavily, but they don't end up benefiting from it because they are the ones generating the revenue," reflected Joan Calzada, professor of economics at the University of Barcelona. in a conversation with NOW.

Faced with these challenges, Telefónica is clear that it will take on more risks, albeit controlled ones. "We want to take on more calculated risks. This means having greater resilience so that, when things go wrong, we can focus on how we analyze and execute, rather than on the results," Murtra stated. This usually has a direct impact on the numbers.

The company has reduced its debt, and Murtra has already stated that he will apply "iron financial discipline," because the exit from Latin American markets means, among other things, a reduction in revenue. In any case, he expects to offset this with growth in Europe, where factors such as the macroeconomic context and the stability of the currency are working in his favor.