Telefonica, the Spanish telecommunications major has emerged as one of the major players in the industry. The article illustrates how a protected government-owned company can be turned into a global player through proactive management and strong leadership.
In early 2003, Telefonica SA, the second largest telecommunications company in Europe faced two major challenges. Latin America was always a natural market for the company. But the social, political and economic crisis in Argentina and Brazil, the two most important economies in the region, had dramatically changed the scenario. In Europe, Telefonica invested billions of dollars in 3G licenses. But 3G did not take off as expected. Telefonica was saddled with huge sunk costs.
Telefonica, Spain's largest MNC was one of the leading players in the global telecom services business (Exhibit 1). It was the largest telecom operator in the Spanish and Portuguese speaking world. Telefonica provided services in 40 countries, serving 78 million customers. In 2001, it was ranked among the top 70 companies in the FT Global 500 list, with 1,60,000 employees. Its services spanned wireline, wireless, data and media/content. Telefonica had nearly a million shareholders and its shares were listed on various exchanges like Madrid, Barcelona, London, Paris, Frankfurt, New York and Lima.
Telefonica was organized into seven business units in Latin America, Europe, the US, Africa and Asia. The fixed line business in Spain run by Telefonica de Espana was the group's main stay. Its Internet arm, Terra Lycos provided Web services. The mobile division, Telefonica Moviles was a market leader in Spain and Latin America (55.6% in Brazil and 52% in Peru2). The other divisions in Telefonica's stable were Telefonica Media (media and entertainment), Telefonica Data (integral data transmission services), Terra Networks (Internet Service Provider), Atento Holding (call-center business) and Telefonica Publicidad e Informacion (telephone directory business).
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