Telefónica’s strategy continues to revolve around its overall mission of “making the world more human by connecting people’s lives.” The key strategic initiatives (pillars) have recently been refreshed to reflect the transformation carried out in recent years, its vision for the future of telecommunications, and to adapt its ambition and responsible Business Plan to new sector realities.
Telefonica: a history in Transformation, ready for its first Centenary
In November 2023, Telefonica gathered relevant members of the investing community and shared its vision for the future of the sector and key strategic guidelines, along with long-term operating and financial targets. The new plan revolves around three objectives: Growth, Profitability and Sustainability (GPS), which are aligned with its Mission, Vision for the future and the guiding principles laid out in its Responsible Business Plan.
Telefonicas’ new plan follows a sustained effort in transformation during the last decade, that has led the company to raise its ambition, as it prepares to celebrate its Centenary. Most strategic initiatives from its former Plan (5 key decisions, as presented in Nov. 2019) have been executed, resulting in a turnaround in terms of revenue growth, improving main profitability ratios and achieving a more sustainable positioning at key operating businesses.
![José María Álvarez-Pallete, Chairman & CEO, Telefónica S.A., in the centre, accompanied by Ángel Vilá, Chief Operating Officer (COO) of Telefónica S.A. on his left, and Laura Abasolo, Chief Financial and Control Officer & Head of T. Hispam, at the Capital Markets Day 2023.](jpg/strategy-capital-markets-day-20239dfb.jpg?w=700)
Today, after a hundred years in its history, Telefonica is ready to face the future:
- Significant investment has been made in deploying next-generation networks (based on Fiber and 5G) in key markets.
- These networks enable the provision of new advanced connectivity services and other complementary digital services to customers, enhancing relevance and satisfaction across all segments.
- Operations have been transformed and automated to be more agile and efficient through the digitization of business processes.
- Telefonica has made progress towards a more sustainable business model by: a) leading the industry in advocating for shared interests; b) collaborating with other operators in infrastructure sharing and standardization; c) committing to emission reduction and energy saving, and d) investing in long-term internal talent through re-skilling initiatives.
Vision: the future of Telecoms
Telefonica, and the telecom sector, are facing a new stage in transformation, driven by deep and disruptive innovation in key technologies. We are effectively entering a new era, at the intersection of:
- Telecommunications, based on the new capabilities from next-generation networks that are enabling new attributes for a differentiated connectivity (throughput, privacy, latency, security…)
- Distributed computing, starting from traditional Cloud services towards new architectures, placing resources closer to our customers for critical applications (Edge.)
- Pervasive deployment of Artificial Intelligence-based agents across the infrastructure, enabling a new wave of automation, both for customer-facing and back-office processes.
- Evolution of the Internet towards decentralized models (Web3) and featuring new client interfaces (AR/VR).
![Online meeting](jpg/strategy-telecommunications-future9dfb.jpg?w=700)
Telecom operators remain strategic for this digital future, key to the societies in which they operate. Connectivity is a must, and Telcos need to ensure it is provided in a manner consistent with the requirements of cutting-edge, advanced use cases (speed, latency, personalization…), while coping with the exponential growth in traffic entails doubling-up the effort in transformation.
A renewed Strategic Plan for Telefonica, based on 5 main pillars:
Telefonica has made public a new set of financial and operating goals, leading to a significantly imroved ambition, and based on the execution five strategic initiatives:
- Maintaining B2C revenue growth by implementing a strategy aimed at attracting and retaining customers through attractive propositions that leverage the quality of our network and product offerings with integrated services beyond connectivity. The strategy will be delivered through B2C digital ecosystems and by capitalising on strong and trusted brands in national markets.
- Sustaining the momentum of the B2B business (companies and public sector) via advanced solutions beyond connectivity. To this end, TEF will focus on further expanding its portfolio of solutions to support clients as they digitalise their businesses, leveraging Telefonica Tech expertise in advanced solutions (cloud, cybersecurity, Internet of Things (IoT), big data) and professional services.
- Developing wholesale revenues and revenues from the Company’s partner agreements into a valuable revenue stream that optimises network utilisation, provides access to different customer segments and contributes to the return on investment of our networks, allowing TEF to expand to the API-based market through the Open Gateway initiative.
- Achieving efficiencies on Telefonica’s cost structure through technological transformation. Acceleration of legacy networks’ decommissioning (Copper, 2G, 3G…) across Telefonica’s main markets. Boosting operational efficiency, leveraging artificial intelligence (AI) and automation, moving towards a more agile company, adapted to the demands of the future.
- Reducing levels of investment activity while maintaining Telefónica’s unique profile by capitalising on early investment in fibre and 5G and the conclusion of the main 5G spectrum auctions, moving past the Company’s CapEx peak while continuing to optimise network deployments through agreements with investment partners and Telefónica Infra.
A Business Plan that reinforces Telefonica’s commitments in terms of sustainability:
Telefónica incorporates all the main aspects of sustainability into its strategy; its main ESG commitments are reflected in the 2024-26 Responsible Business Plan, which also follows the GPS framework for Growth, Efficiency and long-term Sustainability:
In order to drive the sustainable growth of our Company, we focus on strengthening our customer relationships. That is why we plan to implement a new global customer responsibility policy aimed at building unique experiences that are underpinned by sustainable communication.
In addition, we seek to expand our range of products and services by capitalising on the opportunities offered by an ESG perspective. This approach involves promoting Eco smart products, encouraging responsible design practices and boosting digital inclusion through the development of accessible solutions with a positive social impact. Through these initiatives, we seek not only to set ourselves apart in the market, but also to build stronger and longer-lasting relationships with our customers.
In order to generate a higher return on our investments, we aim to optimise how we use our assets. This involves decarbonising our operations and reducing our energy consumption by using renewable sources and applying energy efficiency practices. We also seek to promote the circularity of our processes in order to explore new business models (reuse of customer equipment and mobile devices) and generate efficiencies. Meanwhile, we are working to incorporate sustainability criteria into our financing. This has resulted in the creation of new financial instruments linked to ESG targets and an increase in the proportion of financing linked to sustainability projects.
In order to ensure that sustainability is a driving force for Telefónica’s value creation, we have undertaken management commitments that enable us to be positioned as leaders in the diverse ESG ratings of reference.
To achieve this, we emphasise the importance of promoting excellence in governance and accountability, underpinned by a strong ESG culture. We also implement extensive due diligence processes to ensure sustainable management throughout our value chain. Ultimately, we reinforce our commitment to human talent through practices that prioritise employee well-being, enhance their skills and promote diversity.