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

EUs

directive

eliminating

national

telecommunications monopolies by 1998 ing shaping Telefonicas

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 Telefonicas 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 Telefnica 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
Telecoms 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 Telefnica 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 Telefnicas large and persistent share of the Spanish
telecommunications market, how successful has the EUs 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 EUs directive has been succesfull to make a telecommunication market
in EUs territory.
5. Minority investors in Telefnicas 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.