Pallete defends his six years at the helm of Telefónica: “We are bigger than Netflix or Twitter” | Economy

José María Álvarez-Pallete, during the 2022 General Shareholders’ Meeting, held this Friday in Madrid.Rodrigo Jimenez (EFE)

The president of Telefónica, José María Álvarez-Pallete, has defended his six years of management at the head of the company at the group’s shareholders’ meeting, and has highlighted that with 370 million customers, 47 million more than when he took office in April 2016, they are “a bigger platform than Twitter or Netflix.” During his presidency, after replacing César Alierta, the company has reduced the debt by more than 23,000 million euros, which at the end of 2021 was cut to 26,032 million. In addition, own funds have risen by more than 3,000 million and more than 15,000 million have been delivered to shareholders in dividends and repurchase of shares, according to the head of the Spanish multinational.

Within this balance of his mandate, Pallete highlighted that in the last six years the income from broadband and digital services has gone from accounting for less than 50% to 70%, almost 48,000 million have been invested, and operations have been carried out corporate for more than 35,000 million euros, “including the largest operation in our history”, referring to the merger of O2 with Virgin in the United Kingdom.

The president also made reference to the technological capacity of the Telefónica network, with a data processing power of 11.5 petaflops (measure of the performance of a computer), “higher than that of the largest Spanish supercomputer”, and a capacity of data storage of 176 petabytes, “equivalent to 26 consecutive centuries of high-definition content”, and that has multiplied by almost three in the last six years.

Pallete began his speech with an analysis of the geopolitical situation in the last two years marked by the pandemic and, today, by the war in Ukraine, and has warned about the spread of misinformation. For the director, the situation of the logistics chain, semiconductors or rare metals illustrate the fragility of the “economic model” and that the “world of radical globalization has disappeared”. “We are entering uncharted territory, with different rules, where we must live with the fear of the unknown, where nothing is guaranteed. And we will have the imperative need, as a society, to fight to defend the values ​​we believe in”, he asserted. For this reason, he has demanded that progress be made towards a better world through the use of the “greatest accumulation of technology in history”.

The president of Telefónica has warned about the risk of attacks on the truth that are now produced through machines and algorithms. “We are losing that right because now it is not people, but algorithms, that put before our eyes what hooks us the most, that makes us spend more time inside those platforms in closed environments, to better profile ourselves, to get to know each other better, to to be able to place those advertisements, those products that fit us better”, he pointed out.

The company held its shareholders’ meeting in Madrid in a mixed format —face-to-face and virtual—, at a time when it arrives with its highest price on the Stock Exchange since June 2020. The shares accumulate an annual revaluation of 18%, after bouncing a 19% last year, leaving behind the punishment of 2020, as a consequence of the covid crisis.

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Orange-MásMovil merger

For his part, the CEO of Telefónica, Ángel Vilá, has described the ongoing merger between Orange and MásMóvil as “very positive”, since he considers that it will provide sustainability and rationality, both to the retail market and to the wholesale market, where he has recalled that the company has an agreement with MásMóvil to share the network. To questions from shareholders during the meeting, Vilá has assured that any consolidation “will be welcome” in “a hyper-fragmented market” and that scale is necessary to pay for the networks of the future such as 5G and generate capital returns on investment sufficient to the other players in the market. In this sense, he has shown his hope that the movement will be transferred to the market and commercial activity and prices before closing in 2023. He has also assured that the valuation at which the operation is closed (almost 20,000 million euros) demonstrates the “implicit value” of the company, which in his opinion does not reflect the market (the entire business of Telefónica is valued at more than 26,000 million euros).

The CEO has assured that with this operation, Telefónica will no longer be the dominant operator in the broadband and mobile markets and has urged the National Commission for Markets and Competition (CNMC) to count the platforms of transmission such as Netflix or HBO in their calculation of the pay television market, incorporating the eight million pay television users who use these platforms.

Return to cash dividend

General Meeting of Shareholders of Telefónica, this Friday, in Madrid.
General Meeting of Shareholders of Telefónica, this Friday, in Madrid.EFE

The shareholders’ meeting approved the return to the cash dividend, after having resorted in recent times to flexible dividend (dividend in shares), with the payment on account of the 2021 financial year of 0.30 euros in cash, which will be paid in two tranches: December of this year and June 2023. Pallete has defended that the generation of cash allows this disbursement and does not rule out new purchases of treasury shares to increase returns for shareholders, provided that the agencies classification do not compromise the valuation of the company.

The board also voted the amortization of 139.27 million shares, equivalent to 2.41% of the capital, which the operator currently has in treasury stock. In this sense, Telefónica accelerated the repurchases of shares during the past year, up to around 500 million euros. And he gave his approval to the number of board members at 15, and to the re-election of José María Abril as proprietary director, of Ángel Vilá as executive director, of María Luisa García Blanco as independent director, of Javier de Paz as external director, as well as such as the ratification of María Rotondo as an independent.

The shareholders also voted the approval of the annual accounts, the management reports and the remuneration of the board, including the extraordinary bonuses for the directors, the most controversial item on the agenda, since it triggered the remuneration of the main executives of the multinational in 2021, especially those of the Chairman and CEO, which increased by 68% and 71%, respectively, compared to the previous year.

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