Chairman's letter

José María Álvarez-Pallete

JOSÉ MARÍA ÁLVAREZ-PALLETE
Chairman of Telefónica

José María Álvarez-Pallete

THE DIGITAL REVOLUTION THE WORLD IS EXPERIENCING is without any doubt a technological revolution, but it is also a social revolution. A revolution which will generate great economic value and which can help to address challenges which human beings have been unable to address to date.

Only companies that understand and assume their responsibilities in view of this economic, social and technological change will count in the future

Telefónica, with its first centenary on the horizon, is set to play a leading role in this future. We have all we need for this: the firm commitment of a team deeply involved in creating sustainable value for all our stakeholders; the action plan approved by the Board of Directors in November 2019 to build the New Telefónica; and four platforms that enable us to lead. I would like to highlight, for example, the more than 800,000 daily transactions with Blockchain in Telefónica's supply chain in Brazil and the prediction of our Artificial Intelligence about future pollution levels.

All of this is oriented towards providing greater and greater value to our customers. Three hundred and forty-four million customers, which is equivalent to the population of the United States, who evince an increasing solid emotional link to the Company. Measured by the Net Promoter Score (NPS), it beats that of our direct competitors and improves by one point the score achieved the previous year.

The shareholders keep a sustainable and attractive dividend of 0.40 euros per share which reimburses their trust and the support they give the Company. With regard to the professionals at the Company, we can say with satisfaction that the indicator of Telefónica as a good place to work achieves a score of 58.4%, much higher than the 40% which is considered to be synonymous with excellence.

We are committed to creating sustainable, responsible and shared value

But although Telefónica's commitment focuses first of all on the stakeholders closest to it, it is not confined to them. In 2019, we were once again a key driver of social progress: we contributed more than 52,000 million euros to the GDP of the countries in which we are present, with a tax contribution of nearly 9,000 million euro. This, translates into dozens of schools and hospitals, and we generated more than 1.1 million direct and indirect jobs. In addition, we have strengthened our commitment to the principles of the Global Compact and to the Sustainable Development Goals of the United Nations.

We are fully aware of the urgent need to stem climate change and the role that digitalisation plays in achieving them. Our digital solutions can contribute efficiently to decarbonising the economy, starting with ourselves as we have committed to becoming fully carbon neutral in 2050. Telefónica's engagement as regards action to fight climate change has been recognised again this year by its inclusion in the “A List” drawn up by CDP.

Our long-term commitment is not a mere declaration of intent and nor is it limited to the management of the Company: 20% of the variable remuneration of each and every one of our professionals is linked to long-term non-financial targets: improving customer satisfaction, progressing in gender equality, increasing social trust and reducing CO2 emissions.

Our strategy reaffirms at the same time the three pillars which underpin the sustainability of Telefónica's business model:

  • Sustainable growth, in which we take into account all the social strata to make it inclusive and which in financial terms is reflected in the increase for the seventh consecutive year in income and OIBDA, in strong free cash generation and a significant reduction in debt;
  • Efficiency, supported by the digitalisation of our processes and an excellent network in terms of quality and energy efficiency, to offer customers a better experience every day. From a financial perspective, this is reflected in solid profitability and better returns.
  • And trust, which takes the form of constant improvement in reputation indices and is built upon our Responsible Business Principles, which seek to ensure the ethics, privacy, sustainability and respect for human rights throughout our entire value chain.

In short, the pages that follow show the reality of a Company that is open, trustworthy and a challenger, engaged in building its long-term future and committed in this respect to fostering more human societies on a habitable planet.

Firma presidente

José María Álvarez-Pallete
Chairman of Telefónica