Álvarez-Pallete (Telefónica): “I am not interested in selling part of the fiber network because the debt is stabilized”

The executive president of Telefónica, José María Álvarez-Pallete, assures that he will sell part of the fiber network to pay the company’s debt would not create any value for its shareholders because it is already stabilized. And he adds: “I don’t need to do anything with the fiber, but I know that I have a value”

With a debt of 26,000 million and an average life of 13 years, Álvarez-Pallete, in an interview with Actualidad Económica, you do not perceive a high refinancing risk or a need to go to the markets every year. Another thing is the relative debt, a ratio that has improved, although not enough and, therefore, the rating has not changed.

Asked about the impact of the pandemic on the sector, the president of Telefónica highlights that accelerated digitization by three to five years. In his particular case, this trend has also brought about the death of the company’s star product in its origins, the voice. For him, data, given its added value, is the future of the company and the rest of the telecommunications sector, an industry that has changed to create a new universal digital ecosystem.

The construction of this new fiber optic network translates into investment and risk. Telefónica’s debt has returned to the levels it was in 2016, the year in which Álvarez-Pallete took office. However, the situation is not the same and the Spanish telecommunications company is ahead. Spain has a fiber optic network that exceeds that of the United Kingdom, Germany, France and Italy combined. On the other hand, as the president of Telefónica points out, having been the first, they also they are repaying that debt before their competitors.

Regarding what has happened this last year at the helm of the company, Álvarez-Pallete does not hesitate to say that it has been the most intense, although in his five years in office, everything has happened to them: Brexit, strong electoral cycles, very strong exchange rate cycles, etc.

Regarding the European Union’s position on competition matters, Álvarez-Pallete points out that its policy has been based on subsidize society to create new companies that are only sustainable with such support. This has resulted in the European telecommunications sector being the only deflationary sector for more than 20 years and unable to compete internationally. According to him, Europe has realized how necessary an industrial policy is.

On the other hand, he maintains that he is not interested in “buying to buy”, but rather seeks a consolidation where he can no longer do so, the United Kingdom for example. Instead, the president of Telefónica opts for share infrastructure and keep growing to increase returns.

Finally, in relation to the current price of Telefónica’s share, Álvarez-Pallete considers that it is abnormally low, but also observes value around the company despite the asymmetry between operators and the market. According to the president of the telecommunications company, they are attacking the causes that make them lose value. Since 2019, they have implemented five root measures focused on their four key markets, reducing capital destined for Latin America, boosting Telefónica Tech and Infra, and achieving operational efficiency. Thanks to them, they have managed to grow in reported euros, although they are still not where they should be, he points out. Even so, Telefónica’s earnings per share will grow, even without the extraordinary profits from the sale of the Telxius towers or the joint venture in the United Kingdom.