Perspectives on the Telco industry in Spain
On March 7, 2024, we hosted a telecommunications sector breakfast at our offices in Torre Europa, Madrid, to discuss the future of the telecommunications industry in Spain. We extend our gratitude to the eighteen telco industry leaders and private equity investors who shared their insights on the industry with us. This meeting served as a platform for sharing valuable perspectives on the forces reshaping our sector and discussing strategies to drive value creation.
The telecommunications sector, once considered a crown jewel for investors, faces significant challenges but also unprecedented opportunities. The European industry, still not fully recovered from the impacts of the dot-com bubble, the 2008 financial crisis, and the post-COVID lag, is falling behind in value creation capacity compared to other industries and geographies.
During the event, the growing value gap between telecom companies and major global tech firms was discussed, despite the former's higher EBITDA contribution. This is attributed to the long-term expectations surrounding tech companies. Moreover, telecom operators in Europe face increasingly intense competition in financial markets from American and APAC region companies, partly due to a more favorable regulatory framework in those regions. Nearly all European leaders have vanished from the top 15 global ranking by market capitalization over the last decade.
In this critical context, the conversation focused on four major forces that could drive value creation in the industry, structured around two roundtables. The first explored issues of industry consolidation and segregation, while the second addressed income diversification and digitalization of the operating model. According to estimates by Alvarez and Marsal, these four forces have the potential to grow the industry's value by 30% through network monetization, revenue growth, and optimization of the operating model.
Key questions about industry consolidation, non-strategic infrastructure segregation and spin-offs, income diversification towards adjacent businesses, and digitalization as a means to improve efficiency were discussed. Successful examples such as the segregation of Towercos and data centers, and the adaptation of business models to boost income growth in adjacent services, in line with Asian operators, were shared.
A highlighted aspect of the discussions was the transformative impact of GenAI on the industry. This technology's ability to automate processes, personalize customer experiences, and optimize decision-making is opening a new horizon of possibilities.
Conclusions and Way Forward
The event served not only as a platform for the exchange of ideas and strategies but also as a call to action for all stakeholders in Spain's telecommunications sector. Consolidation, diversification, and digitalization, particularly through GenAI, emerge as the pillars on which to build a prosperous and sustainable future for the industry.
This event reflected the complexity of the challenges our industry faces, as well as the shared commitment to innovation and transformation. At Alvarez and Marsal, we are excited to contribute to this transformation, collaborating with industry leaders to unlock new opportunities and build a more connected and sustainable future for telecommunications in Spain.
