Alfonso Gómez Palacio, CEO of Telefónica Hispam: “The economy is beginning to recover, but Argentina still faces many challenges”

Alfonso Gómez Palacio, CEO of Telefónica Hispam: “The economy is beginning to recover, but Argentina still faces many challenges”
Alfonso Gómez Palacio, CEO of Telefónica Hispam: “The economy is beginning to recover, but Argentina still faces many challenges”

Alfonso Gomez Palacio, CEO of Telefónica Hispam

From Santiago de Chile – “The economy and the macroeconomics are beginning to recover, and that is encouraging, but the country still faces many challenges. There is a feeling that what is being done is leading to a good outcome. There is optimism about what is happening in Argentina,” he said in a conversation with Infobae Alfonso Gomez PalacioCEO of Telefónica Hispam.

The Colombian executive who heads the operation of the Spanish telecommunications giant in eight Latin American countries – Argentina, Chile, Uruguay, Colombia, Peru, Ecuador, Venezuela and Mexico – is at the forefront of the fourth edition of the Hispam Digital Forumthe regional event that is currently taking place at the Torre Telefónica, now renamed Distrito Movistar, in Plaza Baquedano, in Providencia, the nerve center of this city.

This year, Telefónica turns 100 years old. It is one of the largest telco operators in Argentina, along with Telecom and Claro, and a protagonist of an industry that was also caught in the middle of the “deregulation” process promoted by the Government of Argentina. Javier Miley. Days ago, for example, decree 690 signed by Alberto Fernandez at the end of 2020, which declared fixed and mobile telephone services, Internet and cable television as public, and also established that all price increases had to have the approval of the Government. The measure, which was highly questioned by companies in the sector and had almost no concrete effect amid injunctions filed with the courts, was finally repealed. Now, the increases are the responsibility of private companies.

Five years ago, at the end of 2019, Telefónica announced a major restructuring of its business and proposed “gradually reducing exposure to Hispam”. There was even talk of selling operations (except Brazil, a country they had set as a priority market), something they later ruled out.

Locally, they have a total of 17 million customers and as part of this regional reconversion, they have moved forward with new business models, such as partnerships with other companies, as they do with the AT&T mobile network in Mexico; and the deployment of fixed fiber optic networks in Colombia and Chile, with the American fund KKR as a financial partner.

The Hispam Digital Forum takes place this Tuesday and Wednesday in Chile

Telefónica is emphasizing the idea that these days “everything is done through communications.” And it is seeking to get other giants that “use” and build their services on its networks to start paying it for it. This is “the” central debate that telco companies are engaged in globally.

Thus, the three general claims that Gómez Palacio outlined in this Hispam Digital Forum These include generating new frameworks with more deregulation, eliminating obsolete regulations and modernizing regulations “that allow lightening the burden faced by the industry by eliminating asymmetries with competitors”; also generating shared infrastructure models to save costs and efforts; and, as mentioned: “contribution of all actors to the maintenance of the networks.” At this point, the criticisms point to the OTT (the services over-the-top, or those that run on telecommunications networks), but especially three that generate 85% of the traffic in the region: Meta (Facebook, WhatsApp and Instagram), with 58%; Google, with 17% and TikTok, with 10%, according to a recent study by GSMA (a continental entity formed by the main telcos).

“We must use networks intelligently. We all have to contribute to making this industry sustainable,” the regional CEO summed up.

— You talked about the challenges facing the country. What would they be?

— The equation of the telecommunications industry is to deploy infrastructure for the long term that must be profitable in the long term. At the beginning of this deployment, there are already challenges in Argentina with imports, for example. We would like to do things faster. Currency issues also affect the dynamics of the sector. Argentina does have an indicator that we are proud of: it is our most digitalized operation.

—Are you still having trouble importing?

— Things have become normalized and we see that there is an intention to continue on that path, but the dynamics create a gap and there is a previous burden.

—Has the Argentine economic context changed in such a way that it is now time to consider new investments with some of the strategies that are being implemented in other countries in the region?

— We have never stopped investing in Argentina. Over the years we have made capital outlays to have more homes with access to fiber optics. There are about 1.3 million customers with fiber optics, the same as in Colombia and almost the same as in Chile. Argentina is keeping pace and we did it on our own. We do not follow the models of Chile, Peru and Colombia, but we do partner with other companies to deploy more, better and faster, both in the fixed and mobile networks. If the conditions are right, we could evaluate other investment strategies, of course.

The Colombian executive spoke with Infobae at the Telefónica Tower in Santiago

— The current government presents itself as a deregulator and one of its first actions was to repeal decree 690. What other changes do you expect?

— The regulatory framework that this industry had 15 years ago has changed. Technology is dynamic, but so is society’s behavior, and that makes regulations obsolete. The current regulatory framework is for a market with copper cables and ADSL, technologies that have nothing to do with the current ones. We need fewer rules and for those that exist to be focused on security and customer-centered, aimed at the long term and not so much at transactionality. Argentina has been reviewing regulations; from our side, we need legal certainty and stability.

— Is there room for new mobile operators in Argentina?

—There is no one-size-fits-all recipe for every country, but having many operators does not always create a more stable and sustainable environment in the long term. This was seen in Chile. In Argentina, competition is extremely high, and customer turnover is incredible. The regulator will have to weigh the levels of competition and coverage. The Latin American board showed some alarm bells, such as in Brazil, where the number of operators went from four to three. There are also alarm bells in Colombia, Chile and Panama. Things are happening that were not happening before and the industry needs financial sustainability conditions.

“Argentina is reviewing regulations. From our side, we need legal certainty and stability”

—There has been a sharp drop in consumption and Argentine salaries have deteriorated. How does this impact business?

— We have a portfolio of products and services that allows each client to adapt according to their situation. We seek to give them the best equation. At different times there is a greater tendency to go to prepaid or to more limited plans. It is also true that we are essential for the lives of our clients, we are embedded in society. We live those cycles together with the clients. It happened during the pandemic as well.

— Beyond the context, would you prefer to have a financial partner for your business in the country, like in Chile?

— If that were to happen, it would be because there is a regulatory framework that allows us to attract capital and we manage to have an industry that wants to share. Of course, I would like to have a financial vehicle that supports and accelerates the deployment of fiber.

“In Argentina, competition is very high, customer turnover is incredible”

— There is now an incentive for large investments that does not include telecommunications but does include technological issues.

— Yes, it could be. We are investing, but we could put more power into that investment. We need everything to fall into place and for the macro to support it.

—Are you making any concrete proposals for regulatory changes to the Government?

— We have an institutional and regulatory agenda with many points, such as connecting the unconnected and rural Internet issues. We speak with Enacom, we have a fluid dialogue and we are very proactive, but we are not leading a comprehensive modification of the framework like those that the country is reviewing.

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