Telefonica Changes Brazil CEO in Pallete’s First Major Move

  • Eduardo Navarro taking over as Brazil chief from Amos Genish
  • ‘Navarro is the right person in the right place,’ Genish says

Telefonica SA named a new leader for its Brazilian unit in the first major management change since Jose Maria Alvarez-Pallete became chairman six months ago.

Eduardo Navarro de Carvalho, currently Telefonica’s chief commercial digital officer, will take over as chief executive officer of Telefonica Brasil SA, of which he is already chairman, according to a statement from the Brazil unit. He is replacing Amos Genish, who resigned for personal reasons. Navarro will work on the transition with Genish and will officially take over on Jan. 1.

Navarro is taking charge of a unit that’s been among Telefonica’s best performers even as the Latin American country has struggled with an economic slump. Genish has steadily boosted revenue while overseeing the integration with Global Village Telecom SA, the internet operator that he ran and which was acquired by Telefonica Brasil last year.

“Eduardo Navarro is the right person in the right place,” Genish said on a conference call Monday with analysts. His decision to step down had been discussed internally for a few months and the company planned to announce it in the next earnings statement, but the timing was sped up by a journalist’s query on Thursday, he said. 

Genish also said he wasn’t going to work for another telecom operator “at least for a few good years,” and reiterated his decision to leave was for personal reasons.

Analyst Downgrade

Even so, Bradesco BBI downgraded the shares of Telefonica Brasil to neutral from the equivalent of buy, saying the company will lose executive focus with the CEO change.

“One of the main pillars of Telefonica Brasil’s investment thesis, top-notch management, has weakened with Amos’ resignation, increasing execution risk for synergy gains and ongoing market share gain,” analyst Fred Mendes wrote in a report to clients Monday.

Telefonica Brasil fell 6.9 percent to 43.60 reais at the close in Sao Paulo, the biggest decline since August 2011. The stock has climbed 22 percent this year.

Navarro said he is committed to keep generating savings from the integration with GVT. “My management will be one of continuity,” he said in a phone interview from the headquarters of Telefonica Brasil in Sao Paulo. “We don’t want to invent anything.”

Brazil’s telecommunications sector is poised to enter its “golden age” in 2017, with a better economy, an investment-friendly government and the expected revision of the main law that regulates the industry, Genish said in the same interview.

“I’m very optimistic about many things in Brazil,” Genish said.

Navarro has worked closely with Pallete as the head of digital operations, a position he has held since February 2014. Navarro and Pallete are part of Telefonica’s 16-member executive committee.

Genish will continue at the company as head of Telefonica Brasil’s newly created strategy committee, together with Telefonica Chief Financial Officer Angel Vila and Telefonica board member Luiz Furlan. Vila and Furlan are also members of the Brazilian company’s board of directors

Industry Consolidation

The strategy committee’s formation comes as the Brazilian telecommunications industry prepares for a big wave of consolidation. Oi SA, the country’s fourth-largest wireless carrier, filed the country’s biggest bankruptcy protection in June with debt of about $20 billion. The recovery plan includes a sale of the business as a whole or its units and companies including America Movil SAB and AT&T Inc. have expressed interest in Oi’s assets in the past month, according to media reports.

“Oi still has some homework to do,” Navarro said. “We all want Oi to be solid -- it is an important player.”

While Telefonica Brasil is now focused on growing on its own, the company is always aware of merger and acquisition opportunities, the executive said. “We have very good assets. When consolidation happens, and it will happen, we will be attentive,” he said.

Navarro, who holds an engineering degree from the University of Minas Gerais, saw his role grow under Cesar Alierta, the former chairman of the parent company, helping to set strategy and becoming the highest-ranking Brazilian executive in the organization. The Brazil unit accounted for about a fifth of Telefonica’s revenue in the second quarter.

Working aside Pallete, Navarro has gained insight into the current chairman’s focus on digital, ranging from bundled TV, internet and phone packages to digital services. Pallete is an outspoken proponent of cybersecurity and data services including cloud storage. Telefonica’s digital services unit accounted for almost 10 percent of total revenue in the period.

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