Juan Villalonga, Spain's best-known businessman, is set to quit today as chairman and chief executive of Telefonica, the company he has turned into one of Europe's most daring and innovative telecoms groups.
His departure follows a decision by the Spanish stock exchange regulator last month to put him under investigation for alleged insider trading.
Mr Villalonga is understood to have negotiated a substantial severance package, with discussions centring on the sum of four billion pesetas (€24 million). There will also be a glowing thank-you note for his services.
Other senior executives loyal to Mr Villalonga are also expected to resign.
Mr Cesar Alierta, chairman and chief executive of Altadis, the Franco-Spanish tobacco group and a member of the Telefonica board since 1997, is expected to be named the group's chairman at a meeting of the board of directors this afternoon, according to members of the 20-man board.
The board is also expected to split the roles of chairman and chief executive - a reaction, in part, to the powers Mr Villalonga was allowed to accumulate during his four years at the helm of Telefonica. Some members of the board favour the appointment of a collegiate leadership, with three or four executive vice-presidents in charge of the group's fixed-line, mobile, Internet and media divisions.
Mr Alierta is not expected to hold an executive role. His chief responsibility will be to ensure that Telefonica maintains the backing of international investors, who now own about two-thirds of the company. His appointment, however, is seen as a temporary solution until a more permanent replacement to Mr Villalonga can be found.
"We have to respect Juan Villalonga's decision to go, and make it easy for him to do so," a board member said yesterday.
The departures are expected to be accompanied by a recomposition of the board, where there have also been tensions.
The chairman's autocratic relationship with the Telefonica board, which thwarted his proposed merger with KPN of the Netherlands in May, deteriorated rapidly after the inquiry into alleged insider trading started.
Mr Villalonga denies any impropriety in connection with option contracts he acquired in January 1998.
Mr Villalonga's job has been on the line since May when the board of directors, in a rare show of independence, blocked his proposal to merge Telefonica with KPN, which is a 21 per cent shareholder in Eircom, but which has decided to sell that stake.
The dream team Mr Villalonga put together in 1996 to privatise the sleepy, state-owned monopoly and chart its bold international expansion have all but deserted him. And his relationship with the Madrid government has been wrecked by personal and professional disagreements with prime minister Mr Jose Maria Aznar, a childhood friend.
For four years, Telefonica's reputation as one of the most daring telecoms groups in Europe has been linked to the ascent of its 47-year-old chairman. He is still admired by many international investors, who own nearly two-thirds of the company.
Those who have left Mr Villalonga's employ, however, have a different story to tell. They depict a man who has leveraged his power to divide the board, silence opponents and promote acolytes. They argue that Mr Villalonga's compulsive deal-making and intoxication with success have led to strategic mistakes.
