Latin American Telecommunications: Telefónica's Conquest (review)

In this book, Gabriela Martínez studies the history of Telefónica, currently Spain's most important telecommunication company and one of the largest in the world. Martínez focuses on how political, social, and economic changes had an impact on the growth and rapid expansion of this firm. Covering from 1884 until the present times, this book studies the period from Telefónica's foundation until the period of fast expansion, diversification, and integration taking place between 1990 and 2006. Martínez does her analysis in seven chapters.

Chapter 1 presents the driving questions of the book: "What is the historical context in which Telefónica began? What are the political and economic forces that have influenced its growth and transnational expansion? How and why is the Latin American market key to its growth? What is the social and cultural impact of its presence in the countries where this company or its subsidiaries are operating?" (p. 2). Additionally, this chapter gives a general outlook and background of the telecom giant and describes the main economic models adopted in Latin America during the period she studies: the export-oriented, the import substitution industrialization, and neoliberalism. Finally, it describes the process of political transition from dictatorship to democracy which took place in Spain and Latin America in the late 1970s and early 1980s.

The next two chapters offer a historical description of Telefónica's creation and evolution. Chapter 2, "Telefónica's Formative Years," covers the three periods of the company's early history. Her story starts in 1884 with the arrival of telephone to Spain during the rule of King Alfonso XIII, followed by the government's concession of Spain's telephone system to the U.S. multinational International Telegraph and Telephone Company (ITT) and the establishment of the Compañía Telefónica Nacional de España (or Telefónica) in 1924. The chapter includes the twenty-one years in which ITT owned and managed this company until the nationalization by the government of General Francisco Franco in 1945. In this chapter, Martínez shows who the major players involved in the company's management were, the firm's technological achievements, and how technological, political, and social issues are interrelated in both Spain and the world. The third chapter discusses how Spain's membership in the European Economic Community (EEC) influenced the eventual privatization and internationalization of the firm. The first part of the chapter describes Spain's transition to democracy in 1976, its entry to the EEC, and the subsequent expansion of Spanish firms in Latin America, with Telefónica playing a leading role in this "New Conquest." The second part of the chapter studies the business opportunities existing for Telefónica during Latin America's so-called "lost decade" (a period between 1980 and 1989, when most of the continent faced harsh economic challenges). During this period, the state-owned enterprises were not performing efficiently and faced enormous financial losses, which opened the door for the privatization process of the 1990s. This chapter also studies the parallel process of deregulation of telecommunications in the EEC (and later in its heir the European Union), which included the privatization of Spain's Telefónica in 1996.

The core of the book addresses the company's structural transformation that turned it into a telecommunication and media giant. Chapter 4 discusses how Spain's integration to Europe revived old hierarchical relations with Latin America. Spain casts Latin America as its most natural market and Spanish corporations as rightful and benevolent heirs. Cándido Velázquez Gaztelu, Chairman of Telefónica from 1989 to 1996, clearly expresses this idea in words: "For any Spaniard, Latin America is the prolongation of our own land. Our people have the same language and the same culture. There are great opportunities for us to do business together" (p. 66). The chapter includes the description of Telefónica's privatization, the new ownership and corporate structure and strategy, and...