Eva Castillo: We are supporting young talent and we are
a programme for start-ups in Europe. We are promoting
leadership and the entrepreneurial spirit
It’s tempting to ask a long-term banker
who’s just become CEO of a large telecoms operator
if she’s shocked by the state of the industry. But
Eva Castillo, CEO of Telefónica Europe, knew too much
about the company before she took on the new role in at the
beginning of October 2012.
"I’ve been on the board of Telefónica since
2008," she says. And before that, as a banker at Spanish broker
Beta Capital, followed by Goldman Sachs and then Merrill Lynch
for more than 20 years, she had plenty of time to learn not
just about Telefónica and the rest of telecoms.
She has accepted her new role enthusiastically. "When I was
offered the job I couldn’t reject it. I took it
immediately, and it’s been fantastic."
Castillo’s appointment was prompted by the
retirement last year of Julio Linares as chief operating
officer, after 40 years with the company. Linares is remaining
as a non-executive director.
She recognises that it’s an advantage that she had
been on the board for five years when she was asked to take on
the new role. "I knew the company. I knew the executives. These
were advantages. I could call people by their name." And not
just people at the very top of the hierarchy: "I like to go
down three, four or five levels and find new issues to
Indeed, she had worked for Telefónica’s
chairman, César Alierta, before. He ran Beta Capital
until 1996, when he sold it to a Dutch bank, and he joined
Telefónica in 2000.
Until she became CEO Castillo had been in the banking industry
since she graduated, having studied business, economics and law
at the Universidad Pontificia Comillas in Madrid. She started
at Beta Capital in the sales and equity research department.
"This was a broker with international investments, and
Telefónica was number one by market capitalisation in
Spain — and it was nothing like the size of the
company it is today."
After five years, in 1992, she moved to Goldman Sachs in
London. "I was truly Spanish but becoming truly European and
covering all the other cultures." It was a good time to be a
Spanish banker in the capital of European finance.
"At that time the Spanish market was starting to develop
through IPOs," she says. "I took advantage of the explosion of
the Spanish market in London, and Telefónica was one of
those companies you had to follow. I always felt very close to
Telefónica and the market."
Another five years, another move — this time partly
across the City of London to Merrill Lynch, though she also
worked for the bank in Spain. "I spent 13 years back and forth
between London and Madrid. London is my second home. It is very
close to my heart."
Head of equity markets
At Merrill Lynch, where she was at first head of equity markets
for Spain and Portugal, "I started to follow Telefónica
from an industry perspective", she recalls. Within two years
she became country manager for Spain and Portugal and in the
following year CEO of Merrill Lynch Capital Markets
It was an active time for Telefónica, which was
beginning its transition from Spanish incumbent with few
interests outside its borders to becoming one of the largest
operators in the world. The company, formerly owned by the
Spanish government, was fully privatised in 1997.
In 2000 the company made one of its first moves, buying Dutch
television production company Endemol — known best for
its Big Brother programmes — for €5.5 billion.
Telefónica had already had a South American business
since the late 1980s, in Chile, but in the early years of this
century it started expanding: the biggest move coming in 2004
with the purchase of BellSouth’s wireless services
across the continent in a $9.5 billion deal. BellSouth was
pulling out of its non-US interests; later it merged with
another US operator SBC and then took over long-distance
company AT&T to become today’s giant AT&T.
Not satisfied with its expansion into South America,
Telefónica decided to move out of Spain and north of the
Pyrenees into the rest of Europe, buying UK-based mobile
operator O2 in 2005 for £17.7 billion in a deal that also
brought businesses in Germany and Ireland. The same year it
bought Ceský Telecom, the incumbent of the Czech
Republic, and won a bid to provide mobile services in Slovakia.
All of these European operations outside Spain run under the O2
brand. In Spain, the company uses the Movistar brand, also
common in South America. Until Castillo took up her new
position, Spain and the rest of Europe were also in separate
divisions. For the first time Telefónica has unified its
European business under Castillo’s control. That
dual branding is unlikely to change, she says.
While all this expansion was going on Castillo watched
Telefónica from her position in Merrill Lynch.
As the person running the bank’s capital markets
in Spain, and then president of Merrill Lynch Spain from 2003,
it wasn’t appropriate for her to have a role on
the board of the operator. That changed in late 2007 when the
bank promoted her to head its wealth management operation,
covering Europe, the Middle East and Africa. "After a few
months Telefónica asked me to join the board," she says.
"There was no longer any conflict. Of course, I
couldn’t reject the offer."
The evolution has been "very interesting", she smiles: not many
people have had the chance to do so much multitasking". At
first, though, her role on the Telefónica board was
"quite restricted", but since 2010 she was allowed by Merrill
Lynch to join the operator’s committees looking
after strategy, quality and regulatory affairs.
In the past year or so Telefónica has reorganised itself
considerably. Not only has its customer operations in Spain
been put under the same management —
Castillo’s — as those of the rest of
Europe for the first time, but two new units have been created.
One, Telefónica Global Resources, looks after networks,
IT and procurement.
Another is Telefónica Digital, the home of some of the
new services that will transform telecoms — including
cloud computing, mobile advertising, machine-to-machine and
e-health, as well as of new businesses it has acquired or
started, such as Jajah and Giffgaff. It is headed by former O2
CEO Matthew Key and is based in central London, in the heart of
media-land in Soho.
The divisions work closely together, with senior executives on
each other’s management teams. Global Resources
"makes sure we have the devices" and Digital heads the
development of new services such as M2M, e-health and
e-finance. "We have a common responsibility," she says.
In addition Telefónica has two relationships —
Castillo calls them "industrial alliances" — that she
says are "very important to our business".
The company has a 5% stake in China Unicom. Until June 2012 it
was twice that, but the company sold 4.56% back to the Chinese
operator for €1.1 billion. And it has an indirect stake in
Telecom Italia of just over 10.4%.
Both of these are valuable to Telefónica, says Castillo.
"They are good industrial alliances and they bring a two-way
benefit." Alierta is on the board of both companies and this
relationship gives "scale and diversity".
As a banker with such a deep understanding of the telecoms
industry, who is now in a senior management position in
telecoms, how is she addressing the issues at the heart of the
"Europe is less competitive than the US with three or four
operators or China with three" — echoing something
said by France Telecom-Orange’s CEO
Stéphane Richard in his interview with Global Telecoms
Business. "It is more difficult to do business in Europe," he
That’s why "we have been a leading proponent of
network sharing," says Castillo. "We can see a more competitive
market position through network sharing. At the beginning it
was mainly passive network sharing but now it is more active."
Telefónica shares its network in the UK with Vodafone:
"It’s a big change in the industry."
But it’s still a fragmented business, she accepts.
"It is in the general interest of the EU to have a highly
competitive [telecoms] sector," says Castillo. "Other types of
consolidation would be great for a market that is so
The industry is investing heavily, especially by putting up
money for spectrum auctions. The over-the-top providers benefit
from the new spectrum, "but we are the provider of those
Is it going to change? Castillo seems quietly hopeful.
"I’m noticing a lot more two-way conversations
with regulators and governments," she says. "I am meeting with
them and finding they are open to talk."
One incentive for these is the unemployment level in many
countries in Europe: Spain has one of the worst. And that gives
Telefónica another opportunity, she notes. "It is in our
interest to encourage enterprise, and help people develop their
digital skills, and have more trust in digital services."
The company is "investing in innovation", she says —
working with entrepreneurs and supporting start-ups and young
entrepreneurs. "We are supporting young talent and we are
starting a programme for start-ups in Europe. We are promoting
leadership and the entrepreneurial spirit."
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