Telefónica takes aim at new growth strategy

Telefónica Chairman and CEO José María Álvarez-Pallete rallied the troops on Friday by announcing a new internal program that's designed to target new growth while making the company more relevant to its subscribers.

Speaking live in front of 900 executives in Madrid and via a streaming broadcast to the company's 12,000 employees, Álvarez-Pallete unveiled Telefónica's "Reconnect" program for the 2019-2021 timeframe. The Reconnect program follows on the heels of Telefónica's "We choose it all" program that covered the past three years.

Álvarez-Pallete said that over the past few years, Telefónica, which is a 94-year-old company headquartered in Spain, has seen growth in its revenue and operating income before depreciation and amortization (OIBDA) while reducing its debt by €10 billion ($11.36 billion). He said Telefónica had also invested "record numbers to deploy and digitalize a next generation network" while also providing "attractive remuneration" for its shareholders.

"And yet, it is not enough, and we are not satisfied," he said in a prepared statement. "We must aim to capture greater growth for all our stakeholders."

Álvarez-Pallete cited industry challenges, including regulations that haven't been updated for the 21st century, a loss of relevance in the industry and the heavy investments that have been required to deploy 5G and fiber.  

"We have already done much of our homework. We have transformed and digitalized our network, and applied artificial intelligence to our platforms, which will be essential for capturing growth opportunities" said Álvarez-Pallete.

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Going forward, the Reconnect program has five key pillars:

  1. Increased relevance through a digital experience that is "based on simplicity and the personalization of the offer" through use of artificial intelligence and other technologies.
  2. Revenue growth with a focus on monetizing an attractive value proposal that includes both Telefónica's products and services, as well as those of third parties under an open ecosystem of partners.
  3. Improved returns due to the growth of revenues, the efficiencies generated by digitalization, and simplification and management based on the return on invested capital (ROCE).
  4. Strengthening the company's commitment to responsible and sustainable growth with the societies in which the company operates and increasing "Telefónica's proactive role in regulatory issues and ensuring digital inclusion and respect for the digital rights of citizens."
  5. The motivation of Telefónica's employees as a crucial element that is capable of increasing growth. 

Álvarez-Pallete finished up his company speech on an optimistic note.

“Whether the glass is half empty or half full isn’t important," he said. “The only thing that matters is that it can be refilled."

During a shareholders meeting back in June, Álvarez-Pallete said that Telefónica had more than 350 million subscribers across the 17 countries that it serves. He also said that the company had digitized more than 60% of its operations and had deployed more than 1.5 million kilometers of fiber.

On the technology front, Telefónica announced a blockchain partnership with IBM earlier this month to streamline core business processes. In June, Telefónica announced it is working with Ericsson to offer customers network slicing on private networks via the Telco's UNICA cloud platform.

For the past four years, Telefónica has been implementing its virtualization efforts through the company's "Unica" strategy. Telefónica's work in NFV is aligned with the European Telecommunications Standards Institute's NFV vision.