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    Europe Business Conference 2000: The New Europe - Telefonica: Competing In and Out of Europe

     
    12/11/2000
    The European landscape for telecommunications is in deep flux, keynote speaker Antonio Viana-Baptista of the Spain-based giant Telefonica told students at the conference. Thanks to deregulation, privatization, and technological advances, he said, opportunities abound for focussed players. "Don't be afraid of technology," Viana-Baptista told the group. "This business is a little about technology, and a lot about management."

    by Martha Lagace, Staff Writer, HBS Working Knowledge

    Telefonica: Competing In and Out of Europe

    "Don't be afraid of technology," chided keynote speaker Antonio Viana-Baptista when he talked with HBS students about the telecom landscape in Europe.

    "This business is a little about technology, and a lot about management."

    Viana-Baptista is chief executive officer of Telefonica Internacional, part of the giant Spain-based Telefonica, S.A. global telecommunications group. He noted that working for his company is very diverse and rewarding, as well as "very chaotic at times."

    The landscape in Europe has been undergoing rapid transformations, he said, and Telefonica has changed right along with it. In the past five years, for instance, Telefonica evolved from a company that was still 35 percent state-owned to one that is 100 percent private. Now, he said, only 45 percent of Telefonica revenues come from Spain.

    European telecommunications is not one single business, he continued, but rather many businesses in a diverging marketplace. "It would be very difficult for any company to play in a single space," Viana-Baptista asserted, citing Vodaphone, which has specialized in the wireless niche, as one exception.

    "The big discussion that everybody is having about the shape and future of the industry is how you're going to go the last mile: How you will get broadband to your home," he said. "I read an article a few weeks ago in which the Prime Minister of Sweden [was purported to say] that every home in Sweden would have broadband access by 2005.

    "This is, to some extent, a new standard in universalization of telecom service. People in Latin America and in other countries still measure how many people have no phone," he mused. "The new measure will be how many people will have broadband to their homes."

    Due to rapid deregulation, privatization, and technological advances, the winners will be firms that can focus on opportunities that arise, he said.

    Telefonica's investments, though focussed mostly in Spanish- and Portuguese-speaking countries, especially Spain and Latin America, are also spread across the U.K., Italy, Austria, Germany, and other countries. Viana-Baptista said, however, that the company's natural market remained Spanish- and Portuguese-speaking communities. This natural market also represented a competitive advantage.

    Antonio Viana-Baptista, Telefonica, S.A.
    Antonio Viana-Baptista, Telefonica, S.A.

    "It's easier to persuade people at Telefonica to move to Lima or Sao Paulo" than it is for Americans to persuade their executives to move to those cities, he told the conference audience. "Try to persuade any U.S. investor in New York to invest $90 billion in Latin America, and check what their answer is," he said. "We're there with a long-term perspective, and we have invested a lot. You look at major companies in the U.S., and they're much more focussed on consolidation in the U.S. and in Europe.

    "You don't see a lot of companies in the U.S. willing to invest a lot of money in Latin America: They're afraid that [the business climate is] seasonal. We believe in the potential growth of those markets.

    "We're in Latin America—I wouldn't say for life—but for a long time."

    Asked about the role of government and telecommunication authorities in Europe, Viana-Baptista advocated separating government's role as a regulator from its role as an owner.

    "The work of the regulator is work that has to be pursued," he stated. "As for the ownership of companies, I think governments should not have ownership of those companies, and should not interfere with those concentrations in Europe.

    "Some investors still fail to see Europe as a single market. It's still much easier to merge two companies here in the U.S. than in Europe."

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