IN THE HOT SEAT - JUAN VILLALONGA

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From the very beginning, Juan Villalonga's four-year reign at Telefonica was dogged by controversy. Even his government appointment to the still not yet fully privatised company in June 1996 was dismissed by detractors as a result of his friendship with Spanish prime minister Jose Maria Aznar. And according to gossip he was poised to go or be pushed long before the July 26 board meeting at which he was finally ousted.

The issue was an investigation by Spain's stock market regulator into allegations, put forth by El Mundo newspaper, that Villalonga benefited from insider information when he bought and sold stock options on Telefonica during merger talks with MCI and WorldCom in 1998. But the ambitious, 47-year-old lawyer and former head of Bankers Trust in Spain and Portugal was not an easy man to dislodge.

In the past four years, Villalonga has pushed his way aggressively, and seemingly from nowhere, onto the international landscape to earn a reputation as one of Europe's shrewdest and most forward-thinking business leaders. He is respected internationally as a straight-talking, tough negotiator with a head for figures. Investors who have seen Telefonica's value soar since 1996, understandably link Villalonga to the company's success, and the shares have traditionally slumped in response to each new controversy. Newspaper El Pais described Villalonga's reputation in the US to be that of "a new global leader, whose Anglo-Saxon, 'direct, rude and aggressive' style of doing business has little to do with the old etiquette and smooth manners generally attributed to Spanish businessmen, rarely given until now to compete in the US with any real success, especially in a leading sector like internet or telecoms."

He took credit for visionary moves to turn Telefonica from a boring phone company into a European and Latin American media giant. It was under his reign that digital pay-TV platform Via Digital was launched in direct competition with Canal Plus' CanalSatelite. Not content with being a simple distributor, he was quick to learn the importance of securing content for the platform. Telefonica has signed up many of the country's top film and TV talents. In a whirlwind of acquisitions he challenged the US hegemony in Latin America, buying up cable, fixed-line and mobile telephony interests that are intended to be profit centres in their own right, but will facilitate distribution of that programming.

At home, that aggressive business style has been blamed for the high turnover of chief executives at Telefonica's subsidiaries - referred to in the Spanish press as "Villalonga's strongmen".

There have also been suggestions that his ambition caused him to overbid on important acquisitions including Lycos ($12.5bn), Dutch entertainment giant Endemol ($5.3bn) and the politically-motivated June purchase - at a reported five times the value - of 25% of Spanish content packager Media Park. Then the infamous stock options plan for top Telefonica executives blew up last winter.

Villalonga and his inner circle were accused of having tried to capitalise personally on the gains of a company that only went private in 1997. More importantly, the chairman lost the critical support of Prime Minister Aznar, whose re-election campaign was embarrassed by the controversy.

Aznar's government still maintains a controlling "golden share" in Telefonica, which it wielded in May to foil Villalonga's hoped-for merger with the publicly-run Dutch telco KPN. Main Telefonica shareholders La Caixa and BBVA backed the government's stance, delivering a serious blow to Villalonga's autonomy and driving a further wedge into their relations with him.

Villalonga is now said to be putting his negotiating skills to work to assure his future away from Telefonica. There is speculation that he could move into the internet sector in the US, where he resides.