Ringing the changes at Spain’s Telefonica

Enrique Dans
Mar 31, 2016 · 3 min read

On Tuesday, César Alierta announced that he was finally stepping down as president of Spain’s Telefonica and would be replaced by José María Álvarez Pallete. The handover means that at last Telefonica can join the 21st century.

The news of Alierta’s retirement prompted shares in Telefonica to soar, as I predicted some years ago. Little wonder, Alierta is an old-school CEO, the former head of the tobacco company Tabacalera, and a man who had no idea about the telecom industry, but who nevertheless seemed to had a very high opinion of himself and his abilities.

Since Alierta took over in 2000 due to a political decision, Telefonica’s share price has fallen: today it is worth around €32 billion less than at the turn of the millennium, in other words, around 40 percent of its value has been destroyed in that time. When Alierta arrived, Telefonica was far and away the most important company on the Ibex 35, the index of Spain’s leading companies, and valued at around €80 billion. Not that he will be worried about the company’s slow decline under his leadership: one of the best-paid Spanish CEOs, he can look forward to a golden retirement.

For those unfamiliar with the Spanish business scene, think Steve Ballmer at Microsoft: an old hand, but somebody with no idea of how to take a company into the future.

The telecommunications scene has changed radically during the time Alierta has been running Telefonica, but the CEO has remained rooted steadfastly in the past, as well as making sure that anybody who challenged his authority was moved out of the way.

The telecoms operators still have a big role to play: in a hyper-connected world they will be the intermediaries. Nobody is interested in Telefonica’s cables or wavelengths, what they want is the data that flows through them. People want connectivity and ever faster broadband, not a brand. The operators need to understand how to become partners and allies of the new suppliers of internet products, services, and content, rather than trying to compete with them: that is the key to their survival.

We are about to witness a new period of value creation thanks to technology: the spread of the internet of things and the connecting of innumerable devices and objects to the web will bring huge advantages, along with a key role for the operators who know how to make all this simpler for people, in coming up with solutions and not getting in the way. Otherwise, they will simply be swept aside, however drastic that might sound.

I know Telefonica well and I know a lot of people who work there, and I can tell you that Telefonica has a lot more going for it than might appear to have been the case during Alierta’s reign. The company has a huge pool of talent, knowledge and understanding of the business it is in than Alierta ever allowed to blossom.

I am glad that Alierta is finally leaving. I believe that he has destroyed much of the company’s value and that he should of moved on a long time ago. His successor, José Maria Álvarez Pallete is a very different animal, somebody with a much better understanding of the market, as well as being a much more capable communicator. The few things that Telefonica got right over the last few years are largely down to him. So, let’s say adiós to Alierta and hola to the new Telefonica.

(En español, aquí)

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

Enrique Dans

Written by

Professor of Innovation at IE Business School and blogger at enriquedans.com

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)