Telefónica CEO: No More Acquisitions

By Richard Martin Comments

Having doubled its revenue over the last decade through a series of major acquisitions, Spanish carrier Telefónica plans to shift to a strategy of organic growth in existing markets over the next few years.

"Some investors believe that we are going to keep on buying things," group chairman and CEO Cesar Alierta told The Wall Street Journal, “but we are not."

Having become one of the dominant carriers in the burgeoning wireless markets of Latin America, and having moved aggressively into mature European markets with its $36.4 billion purchase of U.K. wireless operator O2, in 2006, Telefónica now ranks among the world’s largest carriers with operations in 25 countries and almost 278 million customers worldwide. Through an investment in China Unicom, the Spanish operator has also expanded into the world’s largest mobile and wireless market.

Telefónica, which has spent about $125.5 billion to emerge as Latin America’s leading provider of telecom services, ended a months-long standoff with the Portuguese government in July when it reached an agreement to buy Portugal Telecom’s stake in Brazilian wireless carrier Vivo Participacoes SA. To counter Lisbon’s reluctance to allow Portugal Telecom to lose its stake in Vivo, Telefónica was forced to raise its initial bid to $9.7 billion. While the deal was considered wildly overpriced, it gave Alierta an important victory as he seeks new growth markets for the Spanish carrier.

Mobile services in fast-growing economies like Brazil and China represent important growth opportunities for established carriers. Alierta also said he plans to up Telefónica’s 8 percent stake in China Unicom to 10 percent by the end of this year.

Investors have rewarded Alierta’s aggression. Telefónica’s share price has risen by 50 percent since early June.

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