Telefonica: Managing Global Operations

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Case Details:

Case Code : BSTA071
Case Length : 12 Pages
Period : 2003
Organization : Telefonica
Pub Date : 2003
Teaching Note :Not Available
Countries : Spain, Europe
Industry : Telecommunications

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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There are 500 million people in Latin America. That's more than enough to deliver the critical mass and synergies to aspire to a much different position globally.

- Fernando Abril-Martorell Hernandez, COO, Telefonica¹.

Introduction

In early 2003, Telefonica S.A., the second largest telecommunications company in Europe faced two challenges, which would determine its future strategy. The company was exposed significantly to Latin America, which was always viewed as its natural market. But the social, political and economic crisis in Argentina and Brazil, the two most important economies in the region, had changed the scenario dramatically. In Europe, Telefonica had invested billions of dollars in 3G licenses. But 3G had not taken off as expected and was still unproven. Telefonica was saddled with huge sunk costs.

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It had to decide on whether to go ahead and build the expensive 3G networks, which would involve an estimated investment of another $8 billion or adopt a wait and watch approach. Both the regions were also experiencing slow economic growth. In 2002, the growth in GDP for the Euro region was 0.8% while for Latin America it was 0.3%.

Excerpts >>

1] Anderson, Jenny, "Telefonica's balancing act," Institutional Investor, March 2002.

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