Telefónica announces restructuring, to create new digital division in the UK

In a major restructuring, Spanish telecommunications giant Telefónica SA said yesterday that it will fold its struggling Spanish unit into its European division and establish a new digital division in the UK.

Telefónica, Europe's second-largest telecom company by market value after Vodafone, will merge its Spanish telecom unit Telefónica Spain into its European business creating a €34 billion revenue business with 105 million customers.

It will set up a new digital division Telefónica Digital in London with regional offices in Madrid, Sao Paulo, Silicon Valley and certain strategic hubs in Asia alongside with the group's three core businesses, Telefónica's New Global Services Unit and Spain's popular social networking site Tuenti, Internet portal Terra, Internet telephony provider Jajah, Telefónica R&D and Media Networks, among others.

The creation of Telefónica Digital will see 2,500 staff relocate to the UK capital and will be headed by Mathew Key, who until now was in charge of Telefónica Europe, the company said.

Telefónica Digital will be responsible for developing and globally exploiting businesses such as video and entertainment, e-advertising, e-health, financial services, cloud and M2M - both businesses aimed at the corporate and residential segments.

The creation of Telefonica Digital "seeks to take full advantage of the opportunities that the digital world offers with regards to new products, services and the value chain," Telefonica said in a statement.

The restructuring by the telecom giant comes after it struggled to offset revenue loss from land line phone calls into mobile and high-speed data transfer services, which is currently a high revenue earner with the advent of new devices that can access the Internet like smartphones and tablet PC's.

Telefonica's sales from Spain, a country that is currently struggling and one of the slowest-growing economies in the world, fell 6.6 per cent in the second quarter, with profit margin falling 2.1 percentage points to 45.3 per cent and the company sees future growth coming from Latin America, where revenues grew by 12 per cent to $10 billion, which is nearly half of the its total revenues.