telefonica sec b

8/8/2019 TElefonica Sec B

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BUSINESS

TRANSFORMATION AT

TELEFONICA DE

ESPANA


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INTRODUCTION

y Telefonica - one of the leading telecommunicationscompanies in the world with major presence inEurope, Africa and Latin America and a monopolisticpresence in the Spanish telecom industry

y However, the late 1990s saw Telefonica going througha bad financial phase due to liberalization of theSpanish telecom industry and the entry of new playerswho were providing bundled voice and Internetservices

y In the year 1999-2000, Telefonicas EBITDA declinedby 10.7 percent and the operating expenses increasesby 11.6 percent to 5,878 million


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CONTD...

y

In the year 2000, Telefonica implemented atransformation program to improve its financialperformance and increase its declining marketshare

y

The transformation program helped Telefonica todevelop customer focus, and new, better qualityproducts

y The program enabled the company to reverse its

declining earnings trend, and become one of theleading broadband operators in Europe along withan integrated communications solutions provider


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CONTD...

yTelefonicas market share in fixed telephone, broadband,and Internet connections also showed a markedimprovement and it became a very customer focused,result oriented organization

y During the first three quarters of 2006, Telefonica deEspana (the Spanish subsidiary of Telephonica SA)generated revenues of 8893.9 million, with a growth of1.7 percent over the same period in the year 2005

y For the nine months ending 2006, the Telefonica group

generated total revenues of 38, 704 million and a netprofit of 5185.7 million. The net profit witnessed anamazing increase of 59.4 percent over that of previousyear


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CASE BACKGROUND

y 1924- Established as Compania Telefonica NacionalDe Espana(CTNE)

y Monopoly over operating Telephone lines In Spain

y Acquire over 70% of existing 78000 lines.

y 1967- Opened a satellite communications GroundStation.

y 1985- CTNE became first Spanish company to belisted in London stock exchange.

y 1988- Ley de Ordenacion de lasTelecommunicaciones (LOT) regulated CTNEs newbusiness activites.


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CONTD...

y As a result CTNE adopted a new name Telefonica de

Espania SA.

y 1989- became a global player.

y 1991- Telefonica de Espana SA entered into an agreementwith Spanish Government.

y Early 2000- Created two global business

Telefonica Moviles

Telefonica Data Corporation


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CONTD...

yLate 2000- Spanish economy slowed down due toworldwide economic slowdown caused by technology

bubble burst

y Same time Spanish market faced crises due to saturated

market conditions.

y Adverse market conditions lead to business

transformation.


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THE TRANSFORMATION PROGRAM

y

Designed around three modules- Growth,Competitiveness and Commitment

y Transformation was to be achieved through a series ofshort term programs,(each of one-year duration),called waves

y The waves mainly comprised of a few blocks ofwork which were designed by the top management,integrated with the budget cycle, and communicatedto the top 500 people in the company

y The waves were reviewed on an annual basis. Seniorexecutives were made the Head of each of themodules, and were assisted by a manager


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CONTD...

y

In order to achieve its objectives, Telefonica deEspana launched a program based on four parameters

y The first parameter was Project Verne, which aimed at

installing 1 million Asymmetric Digital Subscriber

Line (ADSL) lines by 2003y The second parameter was Project Eficient.es, which

aimed at reducing the operating costs by 5 percent, by

the year 2004

y The third parameter was Project Excelent.es, which

focused on building customer satisfaction and loyalty

by achieving excellence in quality using Six Sigma


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CONTD...

y The fourth parameter was Project E-Business which

aimed at using new electronic processes to interactwith the clients

y In order to face the growing competition and limitedmarket growth, Telefonica set three strategic

priorities:y Maintain revenue through traditional business

y Growth in the internet and broadband business

y Progress in business transformation of the company

y In 2002, the operating revenues increased by 0.5percent and the operating income grew by 6.6 percentand Telefonica was able to implement itstransformation process


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GROWTH

y

Telefonica planned to achieve growth by puttingin efforts to develop broadband capabilities and

revamp the product categories

y It had begun testing the new technology ADSL

way back in 1997, recognizing the need to providehigh-speed Internet access

y By expanding ADSL services, the company could

provide several additional services includingInternet applications, content, and multimedia

value added services


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CONTD...

y Telefonica had a huge task of building infrastructure toprovide ADSL services. With growing demand for ADSL,the company was installing 500 new lines everyday in theyear 2000. The demand was expected to grow to 3500lines a day for 2001

y Telefonica divided the market into 4 zones and forecastthe demand based in each zone by taking the historicaldata of demand for existing products

y Telefonica revamped its supply chain networks tomaintain optimum inventory levels and was able to reducecapital investment in terms of network inventory andoperating expenses. It was able to carry out 90% of theinstallations within 10 days of the request


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NEW PRODUCTS & SERVICES

y Voice Mails, Text messages

y 2002, 11 million voice mails and 4,50,000 text

y ADSL Intranet solution, Web, e-Business & net LAN for

corporate users

y Video Conference & Internet gaming for residential users

y Digital TV, Digital audio, Broadband for TV & PC, and

Video on demand

y

New Services like Holiday line, immigrant line andprepay line

y Voice packages, Tariff modules, and value added services

like Caller id, Voice mail and SMS.


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CONTD...

y Enhanced IPTV service, Imagenio.

y 2004 it offered 40 TV channels & 15 Audio channels.

2006 it was available in 140 cities and 4 million

subscribers.


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COMPETITIVENESS

y Quality Is Our Differentiator

Improved quality by practicing Six Sigma, and

improved processes and development of online

capabilities

Followed quality system that was in compliance withUNE-EN-ISO 9001: 2000 standards

Improving Work Process

Launched Operative Excellence module to improve

quality of customer service. Used Six Sigma methodology and a 4 phased working

model was structured.

Diagnosis >End result Model>Action Plan>Follow Up


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SIX SIGMA

y First co. in Spain to adopt six sigma

y Process initiated by Julio Linares at the end of 2000.

y Special unit called Six Sigma Office

y Francisco Alonso was appointed head of Six Sigma Unit

y Top management commitment

y Employees involvement in identifying projects

y 16 members of executive committee were introduced tosix sigma concepts

y 20 senior managers were trained to be six sigma

champions

y 21 black belts were given responsibility of initial pilotproject


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CONTD...

y Implementation monitored through monthly reports & one-to-one

meeting with black belt

y Employees support

y Complemented customer satisfaction program

y First phase- between March-July 2001- 21 projects were identified

y Second phase- began by end of 2001- 80 projectsy Customer satisfaction peaked after first phase

y 150 people involvement, 10 exclusively for six-sigma

y Employees share in the profit earned

y

Financial aspect too was given due importancey Leaders shared experience through intranet

y Linked part of variable salary to participation

y Six sigma- an ease rather than responsibility


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IMPROVING ONLINE CAPABILITIES

y June 2000, launched Telefonica online- communicative

channel between company and its customer

y June 2004, co. acquired Telefonica Data Espana

y Provided data services like connectivity services that

allowed clients to share information between different

locations, internet access, internet publishing, whole sale

traffic service & outsourcing

y Also there were hosting and application services like web

hosting, content delivery, security service and applications

y Website www.telefonicaonline.com for customers

y Developed centro de servicios, a voice based portal to

manage a wide variety of its services


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CONTD...

y Started a project Hermes project in 2003-distribution

process for end customers

y Project in collaboration with logistic department

y

Co. contacted customers on occurrence of any problems indistribution process

y Another initiative called e Attencion, all reports pertaining

to problems, complaints and the way the problems are

solved could be obtained onliney Customers could make general enquiries about services

they used.


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COMMITMENT

y To increase the commitment, company reorganized themarket and customer segments and came up with the set

of values

y Customer Segments

y Rearranging the market segments

y Values


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CUSTOMER SEGMENTS

y Householdsy SOHO

y SMEs

y Large Corporations

y Households eg.yBasis households - basic voice services

yAdvanced digital households include voice with

broadband and digital home services

y Aimed at converting basic customers to high valuecustomers


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CONTD...

y SOHOy Basic and starters

y Proactive and receptive

y Technological and advanced

y Large Corporations Company leveraged on its expertise

in communication to meet the demand for information and

communication technology solutions


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REARRANGING THE MARKET

SEGMENTS

y Decided to compete in 3 retail markets 1. Voice market

2. Internet

3.Multimedia

1.Voice market Provided discounts and news

services to attract customers

2.Internet High quality internet and navigation andADSL development

3.Multimedia Provided multimedia packages in

association with partners


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VALUES

yValue based on expectation of all its stakeholders

y Shareholders and investors had access to all theinformation

y Company aimed at providing customers with

quality and fulfillmenty Company built relationship based on trust and

contributed to society

y

Maintained relationship with various communitiesy In Spain company was among the three most

valued Companies for commitment to socialissues


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THE RESULTS

y Positive Growth @1.9% in EBITDA in 2001

y Contributing Factors Being:

y Price Discountsy New Packages

y Reduction In Operating Expenses

y Tariff Increases

y By 2004 No. of ADSL connections grew to 2.5 millionWith a Coverage of 95%


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CONTD...

y Quality Process Initiation Led To Improvement In Service

Parameters

y In 2004 The Transformation Process Was Re launched

Through A Program Called Meta Cliente

y Crece (Grow)

y Impulsa (Drive Forward)

y Avanza (Move Forward)

y Motiva (Motivate)


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CONTD...

y As Of Dec. 2004 Telefonica had over 12.5 Million Clients

y Residential Users: 30-80 ARPU

y Commercial Users: 50-150 ARPU


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CONCLUSION

y Largest Fixed, ADSL and Mobile Phone Operator in SpainWith Market Share of

y 85% in Fixed Telephone Connections

y 89% in Fixed Broadband Internet Connections

y60% of Imagenio Coverage

y Total Broadband Access stood at 8.8 Million by2008 With a Household Penetration of 60%

yNew Technologies and Service Alternatives With

Multi Functional and Multi Access Handsets wereIntroduced.


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CONTD...

y Offers Broadband Solutions in Communications,

Entertainment and Information

yRegistered a Rise in Profit of 65.6% (8835 Million Euros)in the quarter ending Sep. 2010.


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PRESENTED BY

Budhaditya Bhattacharya (09BS0000579)

Ishan Sodhi (09BS0000918)

Shivam Agarwal (09BS0002226)

telefonica sec b

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