Villalonga’s emergence is very much the story of Spain’s new, revitalized economy: borderless, outward-looking and entrepreneurial. Now 47, he was one of several youngish executives deployed by the Aznar government to knock state-owned companies into shape and prepare them for privatization. Villalonga had spent nearly a decade at McKinsey & Co., the management-consulting firm, and then went to work for several international banks. As a school chum of Aznar’s, Villalonga has never quite managed to dispel the charge of amiguismo, or cronyism, that greeted his appointment to run Telefonica. Similarly, he has been criticized for offering fat stock-option schemes to senior management (Villalonga himself could net $8.7 million), for his frequent use of Telefonica’s corporate jet and even for his voracious acquisitions, including the recent $5.3 billion purchase of Endemol Entertainment, the Dutch company that is Europe’s largest producer of TV programming.
The fact is that Villalonga’s high-flying, rough-and-tumble style was bound to cause friction in a country unaccustomed to his sort of business brass. He can be as aggressive in firing executives as he is in rewarding them. He travels in exclusive circles. He is a representative to the Trilateral Commission, an elite foreign-policy organization. Along with the likes of former U.S. secretary of State Jim Baker and former British prime minister John Major, he served as an adviser to the Carlyle Group, an investment firm, until he stepped down because he was too busy. He rarely grants interviews, closely guards his personal life and is prickly with critics. When the rumor went around earlier this year that he was about to leave Telefonica, he responded true to form: “I have plans for the next five years. From 2001 on, [Telefonica] will create a new company each month.” When the world slavered in approval over the proposed AOL-Time Warner merger last January, Villalonga believed his own merger philosophy was vindicated. “It is very easy to watch a bullfight from the stands,” he scoffed at his detractors.
The fact that Villalonga is such a force today is a sign of just how much the Spanish business scene has changed. Five years ago, to the extent the world knew anything about Spain Inc., it knew about the huge tourism industry (which last year grew faster than any other country’s); Iberia, the state airline, and Seat, the automaker. Today the business pool is much deeper and broader, including such up-and-coming companies as Telepizza and Inditex, the firm that owns the fashionable clothing stores Zara and Pull & Bear and which is expanding fast in Europe, Latin America and the Middle East. These newcomers and old-line companies such as Repsol, the former state oil monopoly, are riding a wave of extraordinary economic expansion. The boom owes a lot to the liberalization of the economy under Gonzalez and especially Aznar, but also to phenomenal inroads Spanish banks and other companies have made in Latin America. Last year Spain had the highest growth rate of any major EU economy–4 percent. Since 1996, Aznar’s government has helped to drive the unemployment rate down from 23 percent to 15 percent. The rate is still, on paper, the worst in the developed world. However, because many Spaniards work on the sly while collecting unemployment benefits, the numbers are wildly misleading; the true unemployment rate, according to most economists, is less than 10 percent–bad but manageable.
Spain is now a surprise rising star in information technology. The Aznar government made liberalization of the telecommunications sector a priority; indeed, it ended up beating the EU’s 2002 deadline for full liberalization by more than two years. In March, Spain awarded the third-generation (3G) mobile- telephony licenses that will over time allow instantaneous links between cell phones and the Internet. Spain is the second European country (after Finland) to do so. That kind of rapid-response adaptability persuaded Worldlyinvestor.com, an online advisory service, to pronounce Spain “Europe’s second-most advanced telecom nation” (after Finland). Worldlyinvestor.com also touted Villalonga as “arguably the toughest and ablest telecom chief in Europe.” That’s one judgment Villalonga probably wouldn’t scoff at.
