The "reconnection" of Telefónica with the investor will prevail the profitable business

The "reconnection" of Telefónica with the investor will prevail the profitable business

The group is facing its 2019-2021 strategic plan, proposing sales to reduce more debt and pretending to be a large distributor of technology

  "It is not important if the glass is half full or half empty, the only thing that matters is that it can be refilled." Make no mistake, it is not the mythical Bruce Lee with a phrase as striking as that "be water, my friend (know water, my friend)" that television advertising popularized in 2007. It was the climax, in an optimistic tone, that the president of the Telefónica group, José María Álvarez-Pallete, put ten days ago to the meeting he had with 900 company managers to present the new strategic plan.

  His predecessor, baptized as 'We chose everything', intended to cover different lines of business in the last three years to grow in its main variables. And it succeeded because, since 2010, its revenues, its gross operating result (oibda), its volume of clients and its commercial margins have not increased at the same time. At the same time, it reduced its bulky volume of debt - the main drag on this telecommunications giant - by 10 billion euros to stand at September 30 at 42,636 million.

Only the stock market punishment that has been suffering for two years the sector of the 'telecos' in general, and Telefonica in particular, prevented that it profitable. Its stock market value accumulates a fall of 10.6% in the last year, although from its annual minimum (6.59 euros in September) it has already managed to rebound 16.5%.

"It is not enough and we are not satisfied", said the first executive of the operator in a message extensible to all the figures of the company, and despite praising that the current strategic plan 2016-2018 "has made us stronger". The new one, which will last for as many years, will begin to be applied in January under the name of 'Reconnects'.

The name has been chosen precisely because among the great challenges to be faced in the entire sector is the deployment of 5G networks and also fiber optic to the home (FTTH), where Telefónica is quite advanced: it is already close to 20 million units connected real estate and the goal is that in 2022 can give full coverage to homes and businesses in virtually the entire country. "We have already done a lot of the duties," said a satisfied president.

Limits to technology
The next step, which the group has already begun to give, is to apply the so-called Artificial Intelligence (AI) to its processes, something that Álvarez-Pallete considers "essential to capture the opportunities for growth". For example, using customer data to further personalize your offer, while maintaining "simplicity" to facilitate your enjoyment. Telefónica already generates 6,600 million euros in digital business, as well as the Spotify and Dropbox platforms together.

Of course, there will be limits for "people make sense of technology and not the other way around". His group, the executive explained, "will not do everything that is possible with technology, networks and artificial intelligence because it is not good for customers and society," he said in a veiled reference to some controversial performances of Facebook and Google. In fact, he even put on the table the right to digital disconnection.

Outside social and political debates - the company, warns, will be more "proactive" on regulatory issues to change the "Old Regime" suffered by the sector of the 'telcos' in the EU - the plan seeks to grow more in revenue - the Annual relative increases are still moderate- "with the focus on monetizing an attractive value proposition". For this, it will not only offer its own products and services, but also those of third parties, even on occasions of apparent competitors. All within an "open ecosystem of 'partners' (partners)," which places the group as one of the leading "technology distributors" in the world.

The other financial key is to raise the return on capital employed (ROCE), managing their assets better. Here, although it did not advance it in that meeting, it would include the sale -in principle partial and maintaining a controlling stake- of its businesses in more saturated territories such as Mexico and Central America, while still discussing what to do with O2 in the United Kingdom. "We have to ask ourselves," he said, "if we are in the right markets and if there is profitable growth in them."

Another twist to Fusion rates

Telefónica wants its old Movistar Fusion customers to switch to the new offer of convergent packages, generally more expensive, but with more services and capacity. To this end on February 5 will reorder all the rates of its previous proposal, raising the majority and freezing the rest, and with Netflix on its television.