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Telefonica unfolds restructuration plan amid industry shake up

The EU telecom market is on the brink of a significant shake-up. Tech services such as cloud computing and IoT (Internet of Things) are booming, and the largest European telecom companies are preparing to ride the current digital wave. As the second largest European telecom company, Telefonica has announced the revamp plan as more traditional lines of business exhibit flattened growth. Therefore, in the search of more durable and upbeat growth, the Spanish giant will create two units devoted specifically to develop tech services and infrastructure, improving its offering in flourishing markets such as cloud computing and IoT. Although the telecom has already a unit working on developing these services, the new units will focus strongly on implementing AI and Big data capabilities, resulting in products and services of a higher quality.

This restructuration process comes at a time where all the major telecom companies in the region are moving to more simple and concentrated structures. Foreseeable changes in EU competition policy suggest that the EU commission will champion telecom companies with a comprehensive tech structure, capable of competing with US big tech. Since the European authority does not want to fall behind in tech development, and considering the repeated clashes between the commission and tech giants, the largest European telecoms are ready to barge in and claim significant market share.

Telefonica will spin-off the Latin American division, except Brazil, in an effort to free capital and ease debt to undertake the planned overhaul. Although it is unclear whether the spin-off will lead to a potential sale to local telecoms, or just a strategy to benefit from synergies and find external investment, the company will redirect capital from its American expansion to the planned innovative tech boost. This last announcement marks the end of a profitable operation for the Spanish company, but it failed to reach the heights originally hoped for.