Spain: Seeking New Worlds to Conquer

(page 2 of 2)

Telefónica (TEF), the pioneer in Spain's previous push abroad, is again leading the way. As the former state monopoly carrier, the company had loads of cash when telecommunications deregulated in the 1990s. After dozens of deals over the past decade, Telefónica has become the largest phone company in Latin America and the third-biggest (in terms of customers) on earth. Since 2003, though, Telefónica has had to fend off growing competition at home, and has invested some $13 billion in domestic broadband and cable TV. Now, with the Spanish economy in the dumps, Telefónica is redoubling its efforts abroad. In September it sealed a $2 billion strategic alliance with Chinese wireless player China Unicom to gain a foothold in the mainland. On Oct. 7, Telefónica offered $4 billion for Brazilian broadband provider GVT, and it's in the running to buy HanseNet, a German Internet player owned by Telecom Italia (TI). "You need to diversify," says Luís Abril, a member of Telefónica's executive committee. "You can't be too dependent on one market."

The country's second-largest bank, BBVA, is renewing its overseas efforts, too. After its acquisition of Bancomer in 2000 made BBVA the largest bank in Mexico, the Spanish company took advantage of the growing appetite for credit at home. Now it's again looking at new markets. In June 2008, BBVA paid $1.2 billion to double its stake in China Citic Bank, the mainland's seventh-largest, to 10.1%, with an option to boost that to 15% next year. And to strengthen its presence in the U.S., BBVA last summer bought distressed Texas lender Guaranty Bank, gaining $13 billion in assets. Further acquisitions across the southern U.S. are likely. "We want to saturate the Sunbelt," BBVA's chief strategist Carlos Torres says from his office overlooking the ornate 19th century facades along Madrid's Paseo de la Castellana.

CLEANING UP ON GREEN

Spain's long-established clean-energy companies are also getting in on the action abroad. Although they weren't a big part of the earlier overseas investment boom—most barely existed in the 1990s—they have benefited mightily from Madrid's subsidies for renewables. In recent years, Spain's green-energy sector has thrived as Spanish law has guaranteed above-market rates to providers of wind, solar, and other clean power. As politicians now seek to rein in costs, those subsidies have been trimmed. But Washington's green-tinted $787 billion stimulus package has offered some relief.

Chomping at the bit is Gamesa, the world's No. 3 wind turbine manufacturer. The company already employs more than 1,100 Americans, and 17% of its $2.4 billion first-half sales came from the U.S., its second-largest market. It's also diversifying into China, where it owns four wind turbine plants near the port city of Tianjin, and India, where it has a joint venture with conglomerate Pioneer Asia. "Spain has been good to us," says Michaela O'Donohoe, Gamesa's chief of corporate affairs. "But the major growth will now come from overseas."

Scott is a correspondent in BusinessWeek's London bureau.

Business Exchange

Track and share business topics across the Web.