The entry of the Saudi operator STC into the capital of Telefónica with 9.9% has been resolved. The meeting of the council of ministers has approved the increase in STC’s participation from 4.9% which it now maintains at 9.9% which it initially bought by converting financial derivatives worth another 5% that it had not executed.
In addition, the Government’s authorization would also extend to the right of the Saudi operator, 62% controlled by the sovereign fund. from the Arab country, to appoint a member on the board of directors of the Spanish telecom operatoraccording to Expansión sources familiar with the process.
Origins
STC removed Telefónica’s corporate foundations on September 5, 2023, when it announced that it had raised a 9.9% stake in the Spanish operator. It purchased 4.9% directly in shares and the remaining 5% in derivatives pending execution, in an operation coordinated by Morgan Stanley.
In the purchase of that stake, STC invested 2,100 million euros (US$2,214 million), a package that today, with Telefónica’s capitalization at US$26,028 million, is worth US$2,602 million, 17.5% more.
This strategy of landing in two phases obeyed the peculiarity of Spanish law which establishes that a foreign investor who wants to take a stake in any company that is a strategic supplier of national defense, -as is the case of Telefónica, which is the main supplier of communications of the Spanish Army- It cannot exceed 5% of the capital or request representation on the council through a member, without first receiving authorization from the Government through the Ministry of Defense.
At the time, in September 2023, STC indicated in a statement that it did not intend to acquire control or a majority stake in Telefónica. Olayan Alwetaid himself explained that the investment in the Spanish operator was a sign of his “confidence in Telefónica’s management team, in its strategy and in its ability to create value.”
The Saudi group then stated that as “long-term shareholders, we support the company and are committed to developing and strengthening our strategic relationship. “We have no intention of acquiring control or a majority stake in Telefónica.”
Much more controlled capital
The main consequence of STC’s surprise entry into Telefónica has been that, a year later, The operator’s shareholding is much more concentrated and controlled in a few hands.
Before STC, the capital was quite dispersed with only two reference shareholdersCaixa and Bbva, both with stakes of around 5% and present on the board, as heirs of that hard core that was forged in the nineties.
But the entry of STC gave the socialist government the opportunity to once again take a significant package. in an operator that had been completely privatized in 1997.
The Government decided to use Sepi to reach 10% of the capital in an operation that was completed on May 20, after the disbursement of US$2,408 million, and the appointment of Carlos Ocaña, a manager very close to Pedro Sánchez, as the new member.
The initiatives of STC and Sepi led CriteriaCaixa to match those participations last July by investing an additional US$1,159 million on top of its previous participation. Observers point out that this situation will cause a much greater influence of these investors in management than in recent decades, given that among the top 4 – including 4.83% of Bbvar – they are close to 35%.
Furthermore, the Government has hinted that it may request a second member which, logically, could provoke a similar demand.r by STC and Criteria, so the weight of the trio of first shareholders would be enormous.
