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A public Telefónica again?


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Diario de Navarra

Álvaro Bañón Irujo

Professor of Financial Management at the University of Navarra and partner of Haltia Capital.

Remember for a moment what you were like, and above all what your environment was like, in 1997. The peseta was in circulation (it was very much in question whether we could join the Euro), we didn't have smartphones, Google didn't exist and those who were lucky enough to have access to the Internet despaired at the slowness of network.

In that year, the Spanish government, presided by José María Aznar, decided to complete the privatization that the Socialist government had begun in 1995 by selling the 21% that the State held in Telefónica, business , which had enjoyed, until a year earlier, a monopoly of telecommunications in Spain.

Monopoly and public business usually mean very bad service for the customer and poorly managed business , and this time was not going to be different. Those of us who are older remember when business took more than two months to install a line in your home or business in order to become a customer! As a reminder to the nostalgic: monopolies are lethal for consumers and if they are public, even worse.

Telefónica's evolution in these years has had to do with the appearance of competitors in Spain, its original market (Airtel/Vodafone, Orange, etc.), with the successive and dizzying changes in the environment that have led it to change its business model (from 'putting lines' to audiovisual producer, from charging for SMS to offering unlimited data ...) or with its spectacular international expansion for which Spain accounts for only 27% of its revenues. Telefónica is now an indisputably better business .

In this context, we have learned of the Government's decision to purchase 10% of the company's shares with the justification that it is a "strategic" company business . It is evident, because it has been leaked, that this is a response to the advertisement of the Saudi STC business to acquire 10% of the company, a percentage that finally remained at 4.99%. The adjective that comes to mind after analyzing the operation over and over again is the same: disturbing.

First of all, the justification of the operation is disturbing. The aforementioned "strategic" nature of the business that justifies or obliges the State to take this participation. What does strategic mean? Which companies and sectors are strategic? Is it a free bar for the Government (using our money) to sit in the committee of Administration of the companies it wants?

It is also disturbing because of the defense of skill. We will never tire of saying that skill is the best thing that can happen to consumers. Now, in one of the most important markets for Economics and with fewer suppliers, we are going to have one of them (the one with the largest share in Spain) whose major shareholder is going to be the State. Its motivation will not be to make the company more efficient, profitable and competitive, which benefits everyone. Evidently, its motivations will be different and it will compete with other weapons. Bad for the consumer.

Will Vodafone and Orange compete on a level playing field? It seems that no. Will a business whose main shareholder is the State, and others are 100% private, have the same access to financing in international markets? We know they will not.

It is worrying, especially because it opens a very dangerous path in a Government in which there is a part that has an undisguised interventionist and nationalizing eagerness. The Second Vice-President herself has celebrated the operation as "the beginning" of the recovery of public companies. This step towards the "nationalization" of "strategic" companies (someone define this elastic term) is a step towards something already known. Bad management, worse service and unfair skill . We have already tried this and we know how it works.

The role of the state should be to favor the skill and always look after the consumer. Not to play monopoly with our money.