Spanish state investor eyes Telefónica stakeSpanish state investor eyes Telefónica stake
Spain's sovereign investment fund may acquire a chunk of Telefónica, a sign that the government is making good on its pledge to defend the incumbent against Saudi Telecom Company.
October 31, 2023
Spain’s sovereign investment fund may acquire a chunk of Telefónica, a sign that the government is making good on its pledge to defend the incumbent against Saudi Telecom Company.
Belén Gualda González, president of the State Company of Industrial Participation (SEPI), said in a brief statement that he is monitoring Telefónica’s situation, and is conducting “an internal exploratory analysis regarding a possible acquisition of a shareholding in said company.”
Rumours that SEPI might make a move emerged on Monday. However, government spokesperson and minister for territorial policy Isabel Rodriguez dismissed as speculation during a press conference, opting instead to reiterate the government’s stance on Telefónica.
“Telefónica is a strategic company for Spain due to its role in the field of telecommunications, but also in defence, and we are not going to comment on every [piece of] information that is published, out of prudence,” she said, according to a report by El Economista.
Confirmation that SEPI does indeed have its eye on Telefónica is the most concrete evidence yet that Spain is uneasy about STC – and by extension the Saudi government – gaining a foothold in Telefónica.
STC, which is majority owned by Saudi Arabia’s Public Investment Fund (PIF), announced in September a €2.1 billion plan to buy 9.9% of Telefónica, making it the telco’s biggest single shareholder. STC said it planned to hold 4.9% of its shares directly, while the remaining 5% would take the form of derivatives that could be converted into voting shares.
The proposed acquisition caused consternation in Spain, prompting assurances from the government that it would “activate the appropriate mechanisms” to protect its strategic interests.
It needs to tread carefully though because Spain is in the middle of trying to forge closer trading ties with Saudi Arabia.
According to a recent report by Al-Awsat, Madrid wants to expand the breadth of economic exchange with Riyadh into new areas by developing a new action plan with the Spain-Saudi Business Council.
A heavy-handed intervention into STC’s Telefónica stake acquisition would doubtless jeopardise this effort.
However, other rumoured developments this week seem to suggest that Saudi Arabia doesn’t want to derail its relationship with Spain either.
Sources cited by El Economistaon Monday (in Spanish) claimed that STC has opted not to convert its 5% of Telefónica derivatives into voting shares, leaving it with a 4.9% holding, rather than 9.9%.
In doing so, STC might ease Madrid’s misgivings and ward off any action from both SEPI and the Ministry of Defence. According to various recent reports (including this one from Reuters), Telefónica’s status as a defence services provider gives the Defence Ministry the right to weigh in on any attempt to acquire between five and 10 percent of it, unless the buyer pledges not to seek a seat on the target company’s board.
If STC really is scaling down its economic exposure to Telefónica, it will be interesting to see whether it forges a strategic alliance with it instead.
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