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The new chair of Telefónica has vowed to pursue deals across Europe with the aim of making the Spanish telecoms group a counterweight to US dominance of the tech industry.
Marc Murtra said that, after being parachuted into a struggling company last month, he hoped to increase Europe’s “strategic independence” by driving telecoms consolidations. The region is also looking to reduce its reliance on Donald Trump and the United States.
“We think there’s got to be — and there is going to be — an intra-market consolidation and a European wide consolidation,” he told the Financial Times in his first interview as Telefónica chair and chief executive. “That’s what we want play a major role in.”
Murtra was drafted in by Telefónica shareholders, led by the Spanish government, to try to revitalise the business. This week, Murtra announced his first big move and a source for funds to build an acquisition warchest: the sale of the Argentina business in cash at a price of $1.2 billion.
Telefónica is valued today at €24bn, some 55 per cent lower than when Murtra’s predecessor José María Álvarez-Pallete took over nine years ago. It is highly leveraged compared with peers, with nearly €29bn of net debt, which constrains its ability to do deals.
The new chair said that telecoms was like defence four years before the Ukraine War, saying its importance in Europe was not fully appreciated. He added that it was important to foster the know-how, adding “technological decision and operational decisions must be made in Europe”.
He acknowledged the big tech companies helped the US move forward, but said Europe has the skills and economic weight to correct the imbalance. “My view, is that while catastrophes are inevitable but decadence isn’t.”
He said that the key to success was having larger companies. “You need large tech companies . . . “You need large tech companies to acquire hard-to get technological and industrial capability.”
He has launched a strategic review of Telefónica, due to be completed in the second half of this year, but he stressed that he would not try to compete with US tech giants in areas that bore no relation to telecommunications.
He said: “We are going to concentrate on what we can do better than anyone else.” “Anything we’re going to do . . . We’ll be looking at the numbers and analyzing them very carefully.
Another investor behind Murtra’s appointment was Saudi Arabia’s STC, a telecoms group that owns almost 10 per cent of Telefónica. Murtra said that when he met STC officials last month in Riyadh, the Saudi group showed “huge respect” towards the business.
For Telefónica, which is 100 years old and was Spain’s monopoly operator until 1997, the pillars of its business are its home country; Germany; the UK; and Brazil.
It’s one of Europe’s largest telecoms companies along with Deutsche Telekom (DT), Orange, Vodafone, BT & Telecom Italia. In the past five-year period, only the share price of Deutsche Telekom has increased. The industry has been struggling with falling prices and rising costs.
According to Connect Europe, Europe is unique in its large number of operators. There are 41 medium-sized operators with more than 500,000 clients. The US, on the other hand, has just five mobile operators who have half a milion customers or more. China and Japan both have four.
Murtra claimed that the European market is inefficient. “It doesn’t allow for economies scale.” The European Commission has signaled its willingness to relax rules that limit mergers.
He would not give details of acquisition targets, but said he saw growth opportunities in cyber security given the volume of personal, business and government data sent via Telefónica networks.
The company already has AI partnerships with groups including Microsoft, Meta and Google, but Murtra said it must use the technology to run its networks and organisation more efficiently. “We need to make sure that . . . [we] Don’t let anyone behind you.”
He remains committed to a 2019 plan to shrink Telefónica’s operations in Spanish-speaking Latin America. As well as the Argentina sale, Telefónica is waiting for local regulators to rule on a provisional deal struck last year to sell its Colombian business to Millicom.
Kieran S. Smith, London: Additional Reporting
