Internationalisation: What role for business and the EU? And what beneﬁts for society?
A Telefónica sponsored conference - 3 December 2008
01. About the event 02. Foreword by César Alierta President & CEO, Telefónica S.A. 03. Five point plan for investment in European telecoms César Alierta, President & CEO, Telefónica S.A. 04. Next-generation broadband urgently needs new Euro agenda Julio Linares, Chief Operating Officer, Telefónica S.A. 05. Competition and innovation must lead the way out of recession Andrew Dean, Director of Country Studies, OECD 06. We need courage and investment Antonio Tajani, Vice-President of the European Commission, Commissioner in charge of Transport 07. Government must support competition Martin Tlapa, Czech Deputy Minister for Trade and Industry 08. Going international has made Telefónica what it is today José María Alvarez-Pallete, General Manager, Telefónica Latin America
09. Doing business is the best way of addressing the challenges of the 21st century Richard Haythornthwaite, Chairman of the Board of Directors, MasterCard Worldwide 10. Business with the poor can be profitable Ad Melkert, UN Under-Secretary General, Associate Administrator of UNDP 11. Globalisation – helping millions escape poverty Roger Liddle, Vice-Chair and Board Member, Policy Network 12. Developing the right partnerships for the 21st century Benita Ferrero-Waldner, EU Commissioner for External Relations 13. Industry needs a level playing field Alfredo Sáenz, CEO, Santander Group 14. Telecoms can drive a greener future Carl-Henric Svanberg, President & CEO, Ericsson 15. We must not question interdependence, but strengthen it Joaquín Almunia, EU Commissioner for Economic and Monetary Affairs 16. Take heed of history Miguel Sebastián Gascón, Spanish Minister of Industry, Tourism and Trade 17. Conclusion
José María Alvarez-Pallete General Manager, Telefónica Latin America Ad Melkert UN Under-Secretary General, Associate Administrator of UNDP Richard Haythornthwaite Chairman of the Board of Directors, MasterCard Worldwide
01. About the event This inaugural Telefónica sponsored conference, held in Brussels on 3 December 2008, brought together an invitation-only audience of European and international policy-makers, business representatives, and Brussels-based media. Peter Erskine, Non-Executive Director, Telefónica S.A., welcomed the speakers and delegates which included European Commissioners, National Ministers and the CEOs and Chairpersons from international businesses. Many European businesses such as Telefónica have risen to become global champions. Now other economic powers such as China and Russia are emerging.
Questions addressed included : • In such an economic environment, what role for the European Union ? • How to foster Europe’s competitiveness, entrepreneurship and innovation ? • Is Europe getting the investment it needs ? • What economic and social benefits can European businesses deliver ? • How can international cooperation between businesses and between business and the public sector help address the global challenges of the 21st century ?
Telefónica was keen to debate key issues surrounding the phenomenon of internationalisation, with the tremors that have shaken the world economy making this discussion more topical than ever. After an opening session, two consecutive panel discussions, moderated by Wolfgang Münchau, Associate Editor, Financial Times, and Director, Eurointelligence, took place. The first panel focussed on the role of the EU in the international economy, whilst the second discussed the economic and social benefits that European businesses can deliver in the global context.
Joaquín Almunia EU Commissioner for Economic and Monetary Affairs
02. Foreword César Alierta, President & CEO, Telefónica S.A. “ The telecommunications industry has been one of the fastest-growing contributors to the European economy and therefore a backbone for the wider economy. ” [César Alierta, President & CEO, Telefónica S.A.] In times of a tougher macroeconomic environment, we believe that open markets and the appropriate regulatory environment will help to generate the investment and innovation that Europe needs now more than ever.
César Alierta President & CEO, Telefónica S.A.
productivity and avoid the risk of opening a gap with advanced economies such as the American or the Japanese ones which are strongly betting on these new technologies”, Alierta stated. In hosting its inaugural event, Telefónica reinforced its commitment to maintaining and growing Europe’s leading position as a global economic force. “As an organisation, we are striving to become even more actively involved in the wider issues affecting the citizens, businesses and communities in which we operate in Europe, and beyond”, Alierta said.
“ A key policy objective of the EU should be that Europe reaches a sustainable position as the world’s most innovative region for ICT. To achieve this, we need a predictable regulatory framework to favour investments in R&D and new infrastructure. ” [César Alierta, President & CEO, Telefónica S.A.] This will ensure that all European consumers and businesses are offered the widest variety of services at the highest quality and a competitive price. The regulatory regime needs to encourage and incentivise the private sector to make the huge investment required to finance new technologies such as high-speed broadband networks – so-called ‘Next Generation Networks (NGNs). This amounts to some €450 billion for fixed and mobile networks. “I think that this is the right time to move ahead and assure an increase on European competitiveness and
“If you think of any other sector which is crucial for business, beyond financial services, it has to be communications. The response to the financial turmoil and its impact on the real economy is certainly of concern to us. We very much agree with the measures adopted by European leaders on 11 December last to revive the flagging EU economy and achieve the EU’s ambitious climate change goals, speeding up Europe’s agenda for tackling both its environmental and energy challenges, and providing new opportunities for the economy, including for SMEs”, Alierta stated. 5
03. Five point plan for investment in European telecoms César Alierta, President & CEO, Telefónica S.A. “Europe’s public and private sectors urgently need to work together in a new spirit of partnership to tackle the huge investment challenges facing businesses in the EU.”
• Promote a new radio spectrum management policy that contributes to the development of new services.
[César Alierta, President & CEO, Telefónica S.A.]
• Foster Europe’s competitiveness by promoting a single European telecommunications market that encourages growth and competition between European industry champions in order to achieve leadership in the converging, global ICT market.
Speaking at a conference in Brussels on Internationalisation, Alierta outlined a five-point plan urging market unity and regulatory reform that will enable Europe to maintain its position as a global leader in the Information Communications Technology (ICT) sector.
Telefónica’s plan was supported by a new study by the Centre for Economics and Business Research (CEBR), which highlights the positive impact the telecommunications industry is having on the European Union’s economy. Among other key findings, the study reported that :
In this plan to foster investment in European telecommunications – which contributed € 374 billion to the European Union economy in 2007 – Telefónica called on the EU to :
• Telecommunications contributed € 374 billion to the European Union economy in 2007, up from € 218 billion in 2000. The CEBR forecasts that this will rise to € 512 billion in 2013 – representing 3.7 % of the EU’s economy. This is more than the IT industry or the hotel and restaurant sector.
• Promote market growth based on innovation in networks and services. • Promote a model of effective and sustainable competition, based on competition among platforms. • Promote efficient investment in new generation networks through gradual deregulation, based on geographic segmentation.
“We want to be acknowledged as reliable and trusted contributors not only on sector-specific questions, but on general questions affecting the whole of Europe. Europe’s competitiveness in the global economy is obviously one of these fundamental debates,” Alierta stressed. Telefónica’s ongoing programme of EU engagement will play a crucial role in contributing to these debates, he said. César Alierta President & CEO, Telefónica S.A.
• Telecommunications is one of the most productive sectors in the European Union. Each worker in the sector contributes € 105,000 to the economy each year – more than twice the EU average of € 50,000. This productivity gap is set to expand further, with economic output per worker in telecommunications forecast to rise to € 138,000 in 2013, compared with the EU average of € 61,000.
04. Next-generation broadband urgently needs new Euro agenda Julio Linares, Chief Operating Officer, Telefónica S.A.
The rollout of next generation broadband infrastructure urgently depends on a new European agenda from both the public and private sectors, said Julio Linares, COO of Telefónica S.A. From a public sector perspective, the EU needs to establish a stimulating regulatory framework based on platform competition and geographic market segmentation while guaranteeing radio spectrum availability for full development of mobile broadband. Linares also called on Brussels to stop microregulation that erodes revenues, even if on a temporary basis while the market gains momentum.
“We are not demanding funding; we are just calling for an agenda that stimulates innovation. Only then can our industry continue to be a significant contributor to the European economy, where we are already supporting 3.56 million jobs growing to at least 3.71 million in 2013”, Linares concluded.
Linares stressed that the private sector also has its role to play in the deployment of next generation networks by developing a range of new applications, services and handsets to meet customer needs.
Julio Linares Chief Operating Officer, Telefónica S.A.
“We have created a connected world that helps people to connect to other people and things that matter to them, and in the near future demands for more sophisticated services are only going to increase.” [Julio Linares, Chief Operating Officer, Telefónica S.A.] 7
05. Competition and innovation must lead the way out of recession Andrew Dean, Director of Country Studies, OECD Economic integration in Europe urgently needs fresh impetus if the region hopes to pull itself out of recession and foster long term growth and prosperity, is the stark warning from the Organisation for Economic Co-operation and Development (OECD). A slowdown in economic integration in recent years was one of the key factors affecting the European Union’s competitiveness and impeding the full development of its enormous potential, according to Andrew Dean, Director of Country Studies at OECD. Dean said a competitive and dynamic internal market is crucial to pulling the European economy out of the current economic crisis. Dean also called for more competition in Europe, where markets are “more heavily regulated than the average OECD economy”.
“European network industries need major reforms to become more competitive and attractive to foreign investment”, Dean told delegates. The OECD representative called for more innovation to help European countries move up the value added chain and become more attractive investment platforms. “While the EU is making progress in some areas of the Lisbon Strategy – to become the most competitive and dynamic knowledge-driven economy by 2010 – it is falling short of this vision, lagging behind the United States and Japan on most indicators of innovative performance”, Dean said. “With the world’s financial markets in turmoil, it will be important not to back-pedal on open and competitive markets. This would prove very costly for Europe and the whole world”, Dean concluded.
Andrew Dean Director of Country Studies, OECD
“Being open to trade and investment is one of the most important steps Europe can take to raise its living standards over the long term.” [Andrew Dean, Director of Country Studies, OECD]
06. We need courage and investment Antonio Tajani, EU Commissioner for Transport and Vice-President of the Commission The European Commission Vice-President and Commissioner for Transport, Antonio Tajani, told the conference that the financial and economic crisis must be addressed also by looking beyond the EU’s confines.
“Europe needs companies such as Telefónica – that are well placed to play a leading role in markets beyond Europe.” [Antonio Tajani, EU Commissioner for Transport and Vice-President of the Commission]
However, the need for Europe to become more active in such markets – in particular those close to its borders such as the Mediterranean rim and North Africa – transcends the current crisis in that greater stability and economic growth in these regions also have broader concrete benefits for Europeans. Business can help address these challenges, Tajani stated. Referring to the economic stimulus package proposed by the Commission, Tajani stressed that one of the areas identified as an engine for generating growth is infrastructure. “While companies have a duty to go ahead, government has a duty to support them,” he said, citing intelligent transport solutions, the completion of trans-European networks and the Galileo satellite positioning system as concrete examples. “We need considerable investment, and we need political courage,” the Commission Vice President stressed. Tajani also insisted on a necessary degree of market regulation. “An economy without rules isn’t part of Europe’s culture”. Rules are a crucial element in building trust, but – “like in football” – these rules must allow the players to also go on the offensive. Antonio Tajani EU Commissioner for Transport and Vice-President of the Commission
07. Government must support competition Martin Tlapa, Czech Deputy Minister for Trade and Industry Martin Tlapa, Czech Deputy Minister for Trade and Industry, addressed hot topics currently riding high on Europe’s telecommunications agenda, including proposals for regulating mobile roaming charges and those revising the broader regulatory framework for the industry, the so-called telecoms package. The Czech Republic, in its role as presidency of the EU Council during the first six months of 2009, would strive to find agreements on these controversial subjects, Tlapa underlined. The guiding principle of the Czech Presidency would be that “Governments and Regulators should support competition among operators”.
“Governments and Regulators should support competition among operators.” [Martin Tlapa, Czech Deputy Minister for Trade and Industry]
Martin Tlapa Czech Deputy Minister for Trade and Industry
08. Going international has made Telefónica what it is today José María Alvarez-Pallete, General Manager, Telefónica Latin America
The decision taken in the 1980s by Telefónica to “go global”, first by expanding to Latin America and later also to other regions, has had a tremendous impact not only on the company itself but also on the countries in which it operates. This was the key message given by José Maria Alvarez-Pallete, General Manager of Telefónica Latin America. He recalled that 20 years ago, when Telefónica was a state-owned entity, its geographical scope was limited
to Spain and it operated in one market only - voice telephony. “Going international has been the key factor for Telefónica being what we are today.” In Latin America, it has become the biggest foreign investor, with each dollar invested having a multiplier effect of 1.3, Alvarez-Pallete underlined. Telefónica’s business accounts for 1 to 2% of GDP in every country where it operates in the region, and 20% of growth in Latin America can be attributed to telecommunications, he stated.
But being such an important player in a sector which is key to economic activity also means that “we have a huge responsibility.” Internationalisation is not only a key driver for economic and social benefits in the developing world - it also has an undoubted positive impact on companies taking this path, Telefónica’s top manager for Latin America stressed. “We have been learning a lot – how to serve low-income customers, for example”. Mobile services have benefited from the dynamism of the region. And whilst, initially, Telefónica sent people to Latin America, increasingly it has been the other way round – “we have been finding huge talent in the region”. Alvarez-Pallete also mentioned Telefónica’s growing involvement in societal issues, in particular through the “Proniño” initiative designed to take children out of child labour and put them back into schools. Last year, the programme benefited 105,000 children, up from 5,000 only five years ago, making it the world’s largest non-profit organisation devoted to children. “We like to think that Latin America has helped us to be a better company, and that we have also helped Latin America in becoming a better region,” AlvarezPallete said.
José María Alvarez-Pallete General Manager, Telefónica Latin America
09. Doing business is the best way of addressing the challenges of the 21st century Richard Haythornthwaite, Chairman of the Board of Directors, MasterCard Worldwide The restoration of capitalism as a trusted and effective force must be added to poverty, climate change, terrorism and pandemic disease as one of the great global challenges of the 21st century. This was the sombre analysis from Richard Haythornthwaite, Chairman of the Board of Directors of MasterCard Worldwide, who added that unless faith was restored in capitalism, all other crises are unlikely to be resolved. All models of capitalism have suffered, Haythornthwaite remarked, and there is a need to recognise the issues which have given it a bad name, such as “inadequate transparency, short term thinking and irresponsible risk taking”. However, the “phase of deep introspection” provoked by the current crisis carried its own risks, he warned, notably that of an overreaction. In this situation it is crucial that business does not stop “doing what it has always done best: create wealth, connect people and cultures, provide products and services, and innovate”.
However, there is a need to establish “a clear international set of ground rules for good business and sustainable wealth creation.” MasterCard’s Chairman underscored, and business cannot do this on its own but needs to work with regulators around the world.
“We also have to manage the expectations of shareholders by restoring the notion of investment rather than speculation”. [Richard Haythornthwaite, Chairman of the Board of Directors, MasterCard Worldwide] Restoring the reputation of capitalism will require broad collaboration, Haythornthwaite said. “If this happens, then we can once again be the force for dealing with the global challenges of the 21st century in the way we do best – by doing business”.
Richard Haythornthwaite Chairman of the Board of Directors, MasterCard Worldwide
10. Business with the poor can be profitable Ad Melkert, UN Under-Secretary General, Associate Administrator of UNDP
UN Under-Secretary General Ad Melkert emphasised that internationalisation, if approached in the right way, can be a win-win situation for both businesses and people in the developing world and help achieve the United Nation’s Millennium Development Goals.
Melkert, who is also Associate Administrator of the United Nations Development Programme, referred to the UNDP’s recent report focusing on “inclusive business models”, profiling a large number of cases where the private sector include poor and exclud-
“The four billion people at the bottom of the income pyramid should not only be seen from the supply side, as employees and maybe producers or business owners; they also are part of the demand side, as clients and customers. They are a huge market.” [Ad Melkert, UN Under-Secretary General, Associate Administrator of UNDP] “Business with the poor can be profitable”, he reminded the audience, and – when it comes to telecommunications – it also is a way of supporting a poorer country’s infrastructure. That, in turn, will contribute “to start the engine”. Even small investments may grow and, little by little, “change the equation”, the former Dutch Labour Party leader said. Companies should understand that fostering social inclusion is important not as an act of philanthropy, but as a business opportunity that can make perfect sense.
ed groups in their commercial business activities, allowing them as companies to innovate, become more competitive, reach new markets, or lower costs. The engagement of the private sector has to be a long term commitment, Melkert concluded, because development results cannot be achieved overnight. “We must avoid that part of the world is side-lined.”
Ad Melkert UN Under-Secretary General, Associate Administrator of UNDP
11. Globalisation – helping millions escape poverty Roger Liddle, Vice-Chair and Board Member, Policy Network “A more responsible capitalism” is what Roger Liddle pleaded for in his intervention. The Vice-Chair and Board Member of Think tank “Policy Network” anchored his intervention firmly in the current economic and financial crisis. The loss in reliance on markets could lead to an ideological shift that could endanger globalisation itself, he warned. Although globalisation undoubtedly has its negative effects, Liddle stressed that nothing else represents a bigger incentive for business to become more competitive and has helped more to get many millions of people out of poverty.
to play to facilitate investment and complement action by private enterprise. He said the same applied to identifying and focusing on the key technologies of the future, the access to finance by SMEs or the retraining of workers – public-private partnerships are a key element that could help restore faith in capitalism and make it work more responsibly.
Roger Liddle Vice-Chair and Board Member, Policy Network
“The worst crisis since the 1930s” calls for a retreat from short-termism and a “return to long-term values” [Roger Liddle, Vice-Chair and Board Member, Policy Network] “We don’t need a bigger State, but a smarter State”. It was necessary to realise that the market alone does not always have the vision or the means to bring about important long-term economic decisions. This is where partnerships between the public and private sectors play a role. “Will markets alone bring about the next generation telecommunications networks, or the low carbon economy ?” Liddle questioned. Governments, he argued, have a role
12. Developing the right partnerships for the 21st century Benita Ferrero-Waldner, EU Commissioner for External Relations Europe needs to look far beyond its own borders and foster close partnerships with emerging economic powers in the East and Latin America to ensure prosperity in the 21st century. Benita Ferrero-Waldner, EU Commissioner for External Relations, said the inclusion of Brazil, Russia, India and China - rising powers who between them will produce 40% of global output by 2050 - was critical. “This is a world where we know that security threats - from climate change, nuclear proliferation, terrorism and conflict to poverty, disease and economic instability - are unconstrained by borders and cannot
be addressed without the active buy-in of these powers, or that of business and civil society,” FerreroWaldner said. The Commission’s current work with its Eastern partners in Armenia, Azerbaijan, Georgia, Moldova and Ukraine was held up by Ferrero-Waldner as an example of how the European Union can exert its influence to generate long-term stability and prosperity dividends.
“From the development of strategic partnerships with each of the rising powers, to regional trade and cooperation agreements with regions such as Latin America, to seeking a swift deal on global trade - the EU is working across the world to create the right opportunities for business.” [Benita Ferrero-Waldner, EU Commissioner for External Relations]
Benita Ferrero-Waldner EU Commissioner for External Relations
13. Industry needs level playing field Alfredo Sáenz, CEO, Santander Group
Cross-border business deals have the potential to create great value, but only if government and regulators allow a level playing field for all was the message from Santander Group CEO Alfredo Sáenz. Operating in different regions across the world presents a number of different challenges - including varying levels of regulation to protectionist traits from local governments.
“Any actions that put at risk the level playing field - whether that is from government or enterprise should be avoided at all costs. International acquisitions have the potential to create value through shared best practices and improved economies of scale.” [Alfredo Sáenz, CEO, Santander Group]
Alfredo Sáenz CEO, Santander Group
14. Telecoms can drive a greener future Carl-Henric Svanberg, President & CEO of Ericsson Telecommunications will play a critical role in reducing carbon emissions and creating a sustainable environment, but can only be truly effective if it has the right tools to do so, was the cautionary message from Ericsson. Carl-Henric Svanberg, President & CEO of Ericsson, said mobile and broadband technologies have the capability to significantly reduce travel and increase efficiency in the way we work.
Europe needs an overriding common strategy for telecommunications, he said, holding up the EU’s common framework for research and development as a shining example of how co-operation can work. “The EU has helped us as an industry to collectively focus our R&D efforts,” he said, adding that this spirit of collaboration should spread across the board.
He said Europe needed to seize the initiative like it did in the 1980s when it drove the growth of the now-ubiquitous GSM standard. “We are in danger of falling behind regions like the USA and Japan in terms of broadband and the full exploitation of the Internet,” Svanberg said.
“Telecommunications can be the key enabler of a more energy efficient and sustainable society, but we need the investment in new broadband network infrastructure to make this happen.” [Carl-Henric Svanberg, President & CEO of Ericsson] Carl-Henric Svanberg, President & CEO of Ericsson
15. We must not question interdependence, but strengthen it Joaquín Almunia, EU Commissioner for Economic and Monetary Affairs
In his keynote address on “Global markets – Common Approach ? Common benefits ?”, the EU Commissioner for Economic and Monetary Affairs Joaquín Almunia urged Europe to continue embracing globalisation and open markets:
“the proven way to grow economies and to improve living standards around the world”. The current financial and economic crises should be a stimulus for more, and not less coordinated action both in Europe and internationally. The EU has a central role to play here, Almunia stressed. “It provides a crucial platform to influence global debates and policy making.”
Joaquin Almunia EU Commissioner for Economic and Monetary Affairs
16. Take heed of history Miguel Sebastián Gascón, Spanish Minister of Industry, Tourism and Trade
Governments and enterprise should learn from history and not repeat the mistakes made in the 1929 financial crisis of limiting flows of credit, trade and investment, the senior Spanish Government minister warned. Miguel Sebastián Gascón, Spanish Minister of Industry, Tourism and Trade, said it was critical that the current financial downturn should not become an obstacle to globalisation and foreign trade.
“For the first time we are seeing Europe acting with a single voice at an international level and this is an asset we should preserve and encourage.” [Miguel Sebastián Gascón, Spanish Minister of Industry, Tourism and Trade]
“We must work together to prevent this crisis stopping the open trade framework between companies and countries, particularly trade with poorer and developing nations,” Sebastián said. “Globalisation will prove to be the key factor in pulling not only developed economies out of this cyclical crisis, but will also help poorer countries emerge from their structural misery.” Sebastián added that a consolidated Europe could lead the world out of recession.
Miguel Sebastián Gascón Spanish Minister of Industry, Tourism and Trade
17. Conclusion The debates put forward a range of recommendations to help the European Union seize its immense investment potential and increase its role in the global economy. Further economic integration; the strengthening of competition through the liberalisation of product and services markets; support for greater levels of innovation enabling Europe to offer attractive investment platforms; better financial regulation to ensure a level playing field; enhance the sharing of information between regulators and supervisors. Other important factors, to help stimulate Europe’s trade and investment, were cited as: taxation, greater labour mobility, stronger regional cohesion, farm subsidies and the promotion of greener energies.
It was noted that being open to trade and investment is one of the most important steps Europe can take to raise its living standards over the long term. Recent studies project that at least one fifth of Europe’s post-war income gains can be attributed to globalisation. With the world’s financial markets in turmoil, it’s important not to backpedal on open and competitive markets. This would prove very costly for Europe and for the whole world. This is especially relevant for the telecommunications industry, as one of the fastest-growing contributors to the European economy and, therefore, a backbone for the wider economy. In times of a tougher macroeconomic environment, it is believed that open markets and the appropriate regulatory environment
can help to generate the investment and innovation that Europe needs now more than ever. Telefónica put forward that a key policy objective of the EU, should be for Europe to reach a sustainable position as the world’s most innovative region for ICT. To achieve this, a predictable regulatory framework to favour investments in R&D and new infrastructure is required. This will ensure that all European consumers and businesses are offered the widest variety of services at the highest quality and at competitive prices. The EU needs to systematically integrate the global dimension in every initiative it takes, Telefónica noted. To support its businesses in becoming more competitive, innovative, and attractive to investment and development abroad should be a priority for the EU; this is the only way Europe can enhance its competitiveness on the world stage. Telefónica wishes to extend thanks to the keynote speakers for their preparation and support for the conference, and to the delegates for providing a thoughtful and enlivened debate. For further information regarding the event, including images, videos, speeches and background information, please visit : www.telefonica.com/europe
Peter Erskine Non-Executive Director, Telefónica S.A. opened the conference with a welcome to all speakers and delegates.
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