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Telefonica sets out Online Telco strategy

Chairman Cesar Alierta presents five-year plan to become an all-digital, multiplay operator

Telefonica has outlined a five-year plan to become an ‘Online Telco’, under the new slogan ‘We choose it all’.
Executive chairman Cesar Alierta presented the plan, which is comparable to Orange’s Essentials 2020, at the firm’s Madrid headquarters, and his address was streamed to all 125,000 employees across 20 countries in Europe and Latin America.

The plan is based on six foundations. Three relate to Telefonica’s value proposition – outstanding connectivity, integrated or multiplay offerings, and a differentiated user experience. The other three are ‘facilitators’ of new digital services and strategies and consist of big data and innovation, end-to-end digitalisation, and capital allocation and simplification.

Telefonica has many pressures – a huge debt load, the ongoing economic slowdown in southern Europe, rising competition in markets on both sides of the Atlantic. It has been restructuring some of its operations, bulking up in some countries – merging O2 Germany with KPN’s E-Plus, adding to its Brazilian assets by acquiring GVT – and slimming down in others, as with its proposed sale of O2 UK to Hutchison Three.

But like other European incumbents, it needs to address the legacies of the past at the same time as transforming into a more digital operator with the ability to play in an over-the-top and quad play world. It has taken some steps in this direction already, although its creation of a dedicated Telefonica Digital unit, while visionary, has been muddled in the execution.

The Online Telco plan, at least as far as it has been presented so far, is mainly focused on slogans rather than concrete actions – the overall goal, said Alierta, is to “promote connections in life for people to choose a world of infinite possibilities”. However, he insisted that these grand visions do translate into real results, citing the ‘Be More’ program, initiated in 2013 around the three pillars of ‘discover, disrupt and deliver’.

While that may sound like Telefonica added to its debt load by overpaying a brand consultancy, in fact Be More has seen the telco increase its investment in new technologies to a historic high level, relative to sales, said Alierta – 17% of revenue this year will be allocated to investments, excluding spectrum. Among key decisions under the Be More investment initiative were three acquisitions, of E-Plus, GVT and a controlling stake in Spain’s Digital+.

“Now we are going to go one step further, placing our defence of the customer’s interests at the centre of our stance, which will focus on three concepts: Digital Trust, Open Internet, and Digital Access”, Alierta said. The facilitators will help to build these three essentials, with a particular focus on personalization and customer experience. Intelligent use of big data will allow the telco to personalize its service bundles for individual subscribers, and end-to-end digital systems will enable those combinations to be delivered and adapted in an agile manner. The third enabler, capital allocation and simplification, means “allocating resources to continue advancing transformation, financing growth, eliminating complexities, and fulfilling promised goals”, explained the operator.

Alierta promised that 50% of employees would have some of their remuneration directly linked to customer satisfaction metrics and promised: “We will grow more in revenue, we will speed up in OIBDA, and we will once again grow in cash generation.”

“This is not just another revolution. It is already being shown to be the revolution that will have the greatest impact of all of human history in terms of generation of wealth,” the chairman continued. “The social development it brings will be more than exponential. And we are lucky enough to be at the centre of this revolution.” He singled out 5G and the Internet of Things as the best examples and said that “facilitating these connections, through connectivity, is the core of our business”. But efficient connections are no longer enough to make a successful operator – “customers have to recover their digital sovereignty, to own their digital footprint and consciously decide how they want to make use of their data.”

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