Broadcast 27th July 2000

	Martin Webber explains the reasons for Juan Villalonga's departure as head of Spain's Telefonica

Juan Villalonga, the flambouyant head of Spanish telecoms group Telefonica, has stepped down.

He became chairman in 1996. With astute purchases in Latin America he led the utility through privatisation and transformation into a world-leader. He was the architecht behind a deal between Terra, the group's internet arm, and the US search engine Lycos.

But he became ensnarled in allegations that he traded shares illegally. He also fell out with his childhood friend, the Spanish Prime Minister Jose Maria Aznar,
who wanted Mr Villalonga to renounce his rights to lucrative share options for political reasons.

In addition he failed to push through a merger with the Dutch telecoms company KPN.

Our editor of business programmes Martin Webber, explained the reasons for his departure:


"Juan Villalonga came to symobolise Spain's switch from a heavily state-directed economy to one which embraced much of the high-risk high-reward American style business culture. He transformed Telefonica from a state monopoly phone operator into a global media and telecoms giant.

"Telefonica built up big interests in Latin America and in mobile phones and is currently planning to buy the Lycos internet search engine. But things began to go wrong for Mr Villalonga when he fell out with his friend from childhood days: the Spanish Prime Minister Jose Maria Aznar.

"Mr Aznar wanted Mr Villalonga to renounce his rights to lucrative share options. The options were seen by some as an indication of capitalist excess and they were proving politically damaging to the centre-right party of Mr Aznar. But the Telefonica boss refused to comply with the Prime Minister's request.

"Mr Villalonga's private life also appears to have had an impact in his ulitmately unsucessful efforts to keep the confidence of his company's board. His decision to leave his wife in December 1998 to live with a former Miss Mexico meant he based himself in Miami.

"It was via a video-conference from Miami that Mr Villalonga tried, and failed, to persuade the company's board to go ahead with his plans for merger with KPN of the Netherlands earlier this year."

Colleages of Mr Villalonga say that after his early success, he paid the price of adopting an increasingly autocratic management styles. Martin Webber