Edella Pramanda (1206266246) Jordan Ramos (1206266385) Imelda Hotmaria (1206267255) Rahmat Nugraha (1206219754)
Case chapter 10: The New Conquistador The most aggressive firm in the telecommunication industry and market us Telefonica S.A. Based in Spain and faced with increasing competition from the EU, Telefonica invested in new equipment and technologies to maintain and grow their business. The evaluated expanding into other EU countries, and a decision was made against European expansion because of significant competition. Telefonica then noticed that the South American countries were privatizing the state owned telephone monopolies. Because of linguistic and cultural ties to South America, a decision was mate to enter these markets. The company initiated entrance in 1990 into the market with an acquisition in Chile, followed by Argentina, Brazil, Peru, Mexico, and Colombia. They have been criticized by many because of the aggressive approach to control the market and many of the business policies after conquering Spain and Latin America, they turned their attention back to Europe, making an initial acquisition in the Czech Republic followed by Italy, the United Kingdom and Germany.
1. How
important
was
the
EU’s
directive
eliminating
national
telecommunications monopolies by 1998 ing shaping Telefonica’s strategy? What would the company look like today if Spain were not a member of the European Union? The EU directive eliminated national communication monopolies by 1998 enabled Telefonica to strengthen their market position in Spain, giving them the growth needed for expansion. And if Spain were not a member of the European Union, maybe would not have affected the company. Since they made an initial determination to not enter the EU market because of existing competition.
2. How important were cultural ties in determining Telefonica’s success in Latin America? Both linguistic and cultural ties to South America were extremely important, which turn gave them a competitive advantage over any of its European rivals looking to enter the South America market. 3. Why did Telefónica initially choose to enter the Czech market, rather than the larger French or German markets? Telefonica initially choose to enter Czech market rather than the larger French or German markets because at that time, There used to have a monopoly fixed line services in Czech, and the telecommunication industries in French and German is more well established and expensive, by acquiring Cesky Telecom’s 51,1% share for 2,746 million Euro, which made Telefonica held the majority share and they can have big market from Czech, at that time, Cesky had 4,6 million mobile subscribers, and Telefonica also can control Eurotel, the subsidiary of Cesky Telecom for mobile sevices. Additional info: In 2013 it was announced that Telefónica would sell its stake in the company to PPF and the company would continue to use the O2 brand for a maximum of four years 4. Considering Telefónica’s large and persistent share of the Spanish telecommunications market, how successful has the EU’s directive been in promoting competition within the European telecommunication industry? “ liberalisation of telecommunications markets, Telecommunications services had to be liberated and conditions of free provision of services by the networks had to be defined. To pursue this objective, the Commission adopted a Directive based on Article 90 of the EEC Treaty [Article 86 TEC], requiring Member States to introduce arrangements ensuring free competition on the European market in telecommunications terminal equipment (modems, telex terminals, receive-only satellite stations, etc.) [Directive 2002/77, see section 15.5.4]. This Directive gives users the possibility of connecting terminal equipment, which they are able to procure freely without being obliged to apply to a single national telecommunications authority. “ - europedia.moussis.eu
By 31st September 2014, Spain has 50,900 million subscribers, which around 16,282 millions people (31.9 %) subscribe Movistar (owned by Telefonica), 11.499 (22.5%) subscribe to Vodafone (UK company), 11.621 (22.8%)
subscribe to Orange (UK company), etc. Telefonica is still the most used in Spain, but the percentage is 31 %, and not much different with UK company, so the EU’s directive has been succesfull to make a telecommunication market in EU’s territory. 5. Minority investors in Telefónica’s South American subsidiaries are unhappy with the parent corporation. Suppose you are a senior manager at the parent corporation. How would you handle the problem of the minority investors? What would you recommend to the CEO should be done about the minority investors? As a senior manager, I should handle this ethically by learning their ethic and knowing why they are not happy and concern of this problem, and search the best solution. First, company should identify the problem, but in this case I think they were unhappy because Telefonica were so aggressive in market and absorbed their profit. The CEO perhaps to be able to give them more benefit or more role in company so they can feel appreciated.
