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Company Brief
Telefónica

by Faulkner Staff

Copyright 2021, Faulkner Information Services. All
Rights Reserved.

Docid: 00016234

Publication Date: 2108

Report Type: VENDOR

Preview

Telefónica, based in Spain, is one of the world’s largest
telecommunications companies. Telefónica owns and operates
market-leading telecom brands in 13 countries and offers services in more than
170 others through strategic partner agreements. The company’s customer base
exceeds 345 million globally and its growth strategy is focused on
the key markets in which it has a strong foothold: Spain, Brazil, Germany, and
the United Kingdom. This company brief provides information on the company’s
history and product line.

Report Contents:

• Fast Facts
• History
• Key Executives
• Major Products
• Major Competitors
• Recent Activity

Fast Facts

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Vendor Name: Telefónica
Gran Via 28
28013
Madrid, Spain
Phone: +34-91-584-03-06
Fax: +34-91-584-93-47
Web: http://www.telefonica.es/
Type: Global Communications Service Provider
Founded: 1924
Service Area: Europe, Latin America
Number of Employees: 113,182 (December 2020)
Stock Symbol: TEF (NYSE, BMAD)

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History

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Telefónica is one of the world’s largest telecommunications companies, operating in three
main geographical regions: Spain, Latin America, and Europe. The company
maintains operations in 13 countries and had revenues of 43 billion euros for fiscal 2020. It
serves more than 345 million customers but has recently been consolidating
operations, divesting its operations in Guatemala in January 2019 and selling Telefónica de Costa Rica, Panama, and Nicaragua to Millicom in February 2019. In Europe,
the firm divested
operations in Ireland, the Czech Republic, and Slovakia when it sold a major
portion of its O2 unit
to PPF Group in 2019. It has
the following brands: Telefónica – a corporate-facing identity for
institutions, shareholders, investors, multinational organizations, large
accounts, and employees; Movistar – the company’s main customer brand for
Spain and Latin America operations; Tefonica Germany; Virgin Media O2 – a
50/50 partnership with Liberty Global’s Virgin Media overseeing UK operations;
and Vivo – Telefónica’s mobile brand in Brazil.

The Spanish telephone system developed as a group of small local
companies trying to maintain service on a local level with little thought
of forming a national network. A revolution in 1923 changed that by
bringing into power General Miguel Primo de Rivera, who was interested in
establishing a national network. At the time, the country had about 90,000
phones but more than half of them were out of order. In 1924, the
government granted Telefónica a national license and agreed to allow the
company to operate for 20 years without interference. The company launched
long distance service in 1960, satellite services in 1967, and
international calling in 1971.

In 1998, Spanish telecommunications was opened to competition to comply
with European Union regulations. In 2000, Telefónica acquired Endemol, a television company based in the Netherlands, for $5.3 billion
USD. Telefónica rebranded Endemol as Telefónica Media. Also in 2000, the
company acquired Lycos, an Internet portal. The company combined Lycos
with Terra Networks, its ISP division, to form Terra Lycos. It later
absorbed Terra Lycos. In 2001, the company merged its wireless operations
in Brazil with Portugal Telecom’s to create Brasilcel. Also, in 2001 and
2002, the company spent over $2 billion USD to purchase four wireless
operators in Mexico and to purchase 65 percent of Pegaso.

In 2004, Telefónica Moviles began selling 3G mobile phones, becoming the
first service provider in Spain to launch UMTS services. In 2005,
Telefónica Moviles completed the acquisition of assets in Latin America.
In 2006, the competition authority for the EU approved Telefónica’s
purchase of UK operator O2 under the condition that Telefónica exit the
FreeMove alliance. In April, Smartcom, a mobile telecommunications
operator in Chile, won the auction for mobile spectrum offered by
Telefónica Moviles’ mobile unit in the country. April also saw the Boards
of Directors of Telefónica and Telefónica Moviles approve a merger plan
that would allow Telefónica to purchase the outstanding shares of its
mobile unit for 3.46 billion euros.

In mid-2007, the European Union fined Telefónica 151.85 million euros,
accusing it of setting wholesale Internet access prices too high to allow
rivals to turn a profit. The company entered strategic alliances with
competitor Vodafone and China Unicom in 2009. In 2010, it took control of
Brazilian operator Vivo by acquiring Brasilcel, making Telefónica the
largest telecom company in Brazil. In 2011, it won a 4G bid in Spain and a
mobile license in Costa Rica. In 2012, it expanded network collaboration
with Vodafone UK. Telefónica S.A. and Telefónica Brasil submitted an offer
to Vivendi in August 2014 to integrate Telefónica Brasil and Global
Village Telecom (GVT). This offer includes a cash consideration of 11,962
million Brazilian Reais and shares representing 12 percent of the share
capital of the new Telefónica Brasil after its combination with GVT. This
acquisition closed in May, 2015. In 2017, Telefónica and Huawei launched
the Open Internet of Things (IoT) Lab in Chile to develop products and
applications related to Narrowband IoT technologies. In 2018, Telefónica
incorporated Pontegadea as a partner in Telxius, its telecommunication
infrastructure business. In January 2019, the company sold its operations
in Guatemala. In February, Telefónica formed an agreement with Millicom
for the sale of Telefónica de Costa Rica, Panama, and Nicaragua. In 2020,
Telefónica sold its unit in Costa Rica to Liberty Latin America for 425
million euros, and formed an agreement with Liberty Global to merge their
UK operations.

Key Executives

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Telefónica’s key executives include:

• José María Álvarez-Pallete – Chairman & Chief Executive
  Officer
• Ángel Vilá – Chief Operation Officer
• Eduardo Navarro – Chief Strategy & Corporate Affairs Officer
• Pablo de Carvajal – General Counsel & Regulatory
  Affairs
• Enrique Blanco – Chief Technology & Information Officer
• Laura Abasolo – Chief Financial & Control Officer
• María Garcia-Legaz – Chief of Staff
• Marta Machicot – Chief People Officer
• Chema Alonso – Chief Digital Consumer Officer

Products

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Telefónica’s lines of business are divided into traditional fixed-line
communications, mobile communications, content and media, directories, and
Internet services. Fixed-line communications include broadband ADSL.
Mobile communications include voice and high-speed wireless data and
Internet. Table 1 describes Telefónica’s portfolio of services.

Major Competitors

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Telefónica faces a number of competitors in the regions where it
operates. These rivals include:

• Altice Portugal: https://www.telecom.pt/
• BT Group: http://www.bt.com/
• Deutsche Telekom: http://www.telekom.de/
• Jazztel: http://www.jazztel.com/
• Ono: http://www.ono.es/
• Orange: http://www.orange.com/en/home
• Spantel: http://www.spantel.es/
• Telecom Italia: https://www.tim.it/
• Telmex: http://www.telmex.com/
• Vodafone Group: http://www.vodafone.com/

Recent Activity

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The UK’s Competition & Markets Authority (CMA) granted final approval in June
2021 of the 50/50
joint venture between Liberty Global and Telefónica to combine Virgin Media and O2.
Liberty Global and Telefónica announced the joint venture in May 2020, bringing together
Virgin Media, the UK’s fastest broadband network, and O2, the country’s largest mobile
operator. The combination will create a strong fixed and mobile competitor in the UK
market, supporting the expansion of Virgin Media’s giga-ready network and O2’s 5G mobile
deployment. The operation is valued at £6.2 billion (more than $8.5 billion USD) on a net
present value basis after integration costs and will create a nationwide integrated
communications provider with £11 billion (over $15 billion USD) in revenue.

In July 2021, Telefónica announced it would sell a controlling share of its
Colombian optic fiber network to investment firm KKR. The deal, valued at $500
million USD, will see Telefónica retain 40 percent of the operation. Upon closing,
Telefónica’s existing fiber optic network will become open access and available for
all internet service providers in Colombia to utilize. The new company plans to expand
existing fiber optic coverage from approximately 1.2 million homes to, at minimum, 4.3
million by the end of 2024, covering at least 87 municipal areas, with more than half
consisting of underserved areas outside of high-income urban areas. The companies aim
to facilitate new 5G connectivity and provide access to telework, telehealth, and virtual
education. The operation will be run independently by a local team in Colombia consisting
of both KKR and Telefónica employees.

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