Telefonica Plans $2 Billion Savings, Gives Pallete Greater Role

Telefonica SA, Spain’s largest phone company, announced a 1.5 billion-euro ($2.1 billion) cost-savings program and an extensive reorganization that will give Chief Operating Officer Jose Maria Alvarez-Pallete greater executive responsibilities.

The carrier will integrate its Europe, Latin America and digital divisions and create the new position of chief commercial digital officer, who along with the chief global resources officer will report to Pallete, Madrid-based Telefonica said in a statement today. Pallete will oversee operations across Europe and Latin America.

Santiago Fernandez Valbuena, head of Latin America, will become strategy chief and remain a board member. The savings target is planned for the coming years and doesn’t take into account synergies from the proposed merger of Telefonica and Royal KPN NV’s German businesses.

Telefonica, scheduled to release earnings tomorrow, is fighting to stop its European business from shrinking as growth slows in emerging markets such as Brazil. In the past two years, the carrier has sold assets in countries including Ireland, the Czech Republic and China to pare debt and strengthen its finances.

Led by Chairman and Chief Executive Officer Cesar Alierta and COO Pallete, Telefonica faces intensifying competition in Spain, where Orange SA and Vodafone Group Plc are expanding beyond mobile-phone services and cable operator Grupo Corporativo ONO SA is vying for wireless customers.

Telefonica shares rose 0.2 percent to 11.44 euros at 2:01 p.m. in Madrid. The stock has gained 20 percent the past 12 months, giving the company a market value of 52 billion euros.

Before it's here, it's on the Bloomberg Terminal.