Published on 14 Oct 2021 on Zacks via Yahoo Finance
Telefonica (TEF) Gains From Organizational Rejig, Debt Reduction
Telefonica, S.A. TEF seems well-positioned, courtesy of its focus on optimized value creation by prioritizing investment in its core operations (Spain, Germany, the U.K., and Brazil). It intends to improve its Hispam operations to streamline the Group structure and core market focus, reduce exposure to emerging markets and foreign exchange volatility, and accelerate deleveraging.The company’s digital business unit, Telefonica Tech, aims to boost its existing revenue growth streams, making them more visible and increasing optionality. Telefonica’s new operating model is expected to accelerate the digitization of the Group's operations. The company remains on track to meet its 2021 financial targets, which reflects its confidence in long-term growth trends for connectivity and digital services.
Organizational Changes for Seamless Operations
The Spain-based telco giant is currently on a roll. The company has been making necessary organizational changes to boost its operational momentum. Recently, it struck a major milestone with the creation of a new Strategy and Development department. The new-age organizational structure is considered to be a significant move in the company’s business roadmap as it prepares to tap lucrative opportunities offered by the fourth industrial revolution with improved efficiencies while accelerating technological transformation in this dynamic environment.The Strategy and Development department will lead the technological transformation process and bring together current leaders from Corporate Strategy, M&A, and Digital Innovation units under a single umbrella. Apart from accelerating technological transformation, Telefonica’s Strategy and Development department intends to promote internal efficiencies by capitalizing on big data and artificial intelligence capabilities. With a customer-centric approach, the segment will leverage its strategic vision to promote both organic and inorganic expansion, fueled by the overall growth of the business. This, in turn, will help the unit to generate sustainable profits in the long run.Also, in one of its landmark moves, the company announced the closing of Liberty Global plc’s Virgin Media and Telefonica U.K.’s largest mobile network O2 mega-merger deal. The 50:50 joint venture, valued at approximately £31.4 billion ($44.4 billion), including debt, is touted as a turning point in the history of the U.K.’s telecommunications industry. The merger is expected to not only mark the launch of a strong mobile competitor in the U.K. market but also generate considerable synergies for Telefonica, with a net present value of £6.2 billion. Telefonica also consolidated three of its global businesses under a single unit — Telefonica Global Solutions. The move is part of its ongoing transformation process to strengthen international businesses. This segmental rejig will speed up operational execution and maximize synergies with greater flexibility.