All change for Telefónica in Latin America

All change for Telefónica in Latin America

Big changes are ahead for Telefonica, according to a recent announcement from group CEO José María Álvarez-Pallete, notably for the telecommunications giant’s Latin American operations.

Four core markets – the UK, Spain, Germany and Brazil – are to be prioritised. The Latin American businesses (except Brazil) may be spun off into a single unit or sold. A cybersecurity, IOT and AI division and a tower unit are part of the new plans as well as a restructuring of the management structure.

The four priority markets account for 218 million of about 300 million subscribers and about 80 percent of the group's revenues. Telefónica now derives only a fifth of its operating profit in South America. Sales or partial divestments in this region could help reduce debt, not to mention complexity and local issues involving regulation, competition and currency.

In any case, with 5G investment on the way, Telefonica would not be the only operator to be revising its international operations to ease debt (the company had €57bn of gross debt at the end of September according to the FT) and ensure it has more money to invest in its core markets.

As for the new divisions, they reflect a belief that traditional telecoms operations alone – selling phones and contracts – are not the way ahead. The company argues that it must change from a traditional telecoms company into a technology business. A unit called Telefónica Tech is already focusing on the internet of things, cyber security and cloud computing.

It’s not yet clear precisely what will happen to the non-core Latin American operations. However, Telefonica is evidently bullish about its plans; Álvarez-Pallete has told reporters that the new strategy will add an additional €2 billion a year to group revenues. 

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