Movistar says goodbye to the market in Latin America

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Telefónica, owner of Movistar, will leave much of Latin America to concentrate on other markets

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Person using a cell phone. / Photo: Unsplash - Reference Image

LatinAmerican Post | Marcela Peñaloza

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Leer en español: Movistar se despide del mercado en América Latina

José María Álvarez-Pallete, executive president of Telefónica, announced that the company made the decision to focus on four markets: Spain, Germany, the United Kingdom and Brazil, and sell all its operations in Latin America. The press release explains that the decision was taken as an "accelerator in the transformation of the company." The main objective is to consolidate in markets where they can grow “with a long-term sustainable model”.

However, behind accelerating business transformation, three other reasons would be hidden. The reasons would be the geopolitical uncertainty of the region, a bulky debt that Telefónica has and the change in consumer preferences.

Regarding the first reason, the executive explained that “geopolitical and macroeconomic and regulatory uncertainties and high competition in the sector require an increasingly demanding allocation of capital. If in the past the low penetration of voice and data services, especially in emerging countries, ensured future growth, the growing maturity of markets and the emergence of new competitors subject to different rules, it demands very focused strategic approaches.” The difficult social situation facing Latin America would have been decisive when deciding to leave the region.

The company, which has been in the region for more than 30 years, will focus on strengthening its presence in Brazil and will be listening to offers regarding its subsidiaries in Colombia, Chile, Uruguay, Peru, Ecuador, Venezuela, and Mexico. According to the BBC, the company expects to be able to sell, find partners or put Latin subsidiaries in the stock market.

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To the anticipated move of being affected by the economic instability of the region, the large amount that Telefónica owes its creditors is added. BBC says that Telefónica's significant debt may also have played a decisive role in the decision. The company owes US $ 42,000 million and analysts believe that it could have been concluded that selling assets is a good strategy to settle the debt.

Finally, the change in the world of telecommunications has also put the company in check. Customer preferences have been transformed thanks to the internet and digital ecosystems. This means that services that previously generated high revenues, such as long-distance calls, have become obsolete.

What will happen to Movistar users?

The decision, which took many by surprise, does not mean that the brand will disappear. Nor does it imply that people who use the company's services will stop receiving them. For the moment, operations will be maintained normally while the company listens to offers. That is, it is expected that Telefónica will only change owners.