Telefónica states intent with corporate restructure

Spanish incumbent and global carrier Telefónica has restructured itself into four new divisions as part of what the firm called “sweeping changes” designed to “reinfoce the operator’s status as a global player and leader in the digital environment”.

Most interesting is the creation of a digital services unit that consolidates the various forays the firm has recently been making into areas such as e-health, cloud and M2M. The restructure also brings the Spanish operation, which has suffered along with the domestic economy, into a wider operating organisation.

Previously the Spanish operation was a standalone unit, with the O2 properties in the UK, Ireland, Germany, Slovakia and the Czech Republic acquired by the parent company in 2006, grouped together as Telefónica Europe.

Under the new regime, Telefónica’s operating companies will be grouped into two units; Europe and Latin America. Figures from Informa Telecoms & Media’s World Cellular Investors for Q211 put the total operator subscriptions for properties where Telefónica holds a stake at 220 million in the Americas and 111.3 million in Europe. The firm also has minority stakes in several African operations, China Unicom, Telecom Italia and Portucal’s TMN.

The European unit will be headed by José María Álvarez-Pallete, previously head of the Latin American unit. He will be succeeded in Latin America by Santiago Fernández Valbuena, the firm’s general manager of strategy, finance and corporate development.

A Global Resources unit has also been created, with a view to wringing further economies of scale from Telefónica’s footprint, under the leadership of Guillermo Ansaldo, previously head of Telefónica Spain.

But it is the creation of Telefónica Digital that is the most interesting element of the restructure. Headed by Matthew Key, hitherto the head of the O2 properties, the new unit will focus on developing the firm’s plays in video and entertainment, advertising, e-health, financial services, cloud and M2M. Key’s unit, which will be headquartered in London, with satellite offices throughout the firm’s footprint, will have 2,500 staff working to support the European and Latin American businesses with products and services where the firm has “the potential to operate directly in over the top businesses”.

Dario Talmesio, principal analyst at Informa, said the creation of Telefónica Digital was a sound move, but would depend on the firm’s ability to execute. “Much will depend on how it will work with legacy business and to what extent it is able to cascade innovation into the core business,” he said.

He also warned that the carrier would not have an easy time going up against established OTT players. “Failing that, the risk is that all its eggs will be put in one basket. If Telefónica wants to play at pure OTT, it should remember that it is in the same playing field as the internet giants—and it’s a tough business,” he said.

“Although the decision is a good one, Telefónica needs to keep its core business in mind while implementing internet-style business models.”