Telefónica has a crucial appointment next Wednesday, November 8. It celebrates its Investor Day, an event with analysts from around the world in which, in addition to presenting the results of the first nine months of the year, it will communicate its new strategic plan for the next three years, 2023-2026.
The original idea was to explain to the market the “success” of the total remodeling presented in November 2019, with which the old Telefónica of voice calls has been left behind to become a technological services company. “Better customer service, value creation and taking advantage of future opportunities,” were the words with which José María Álvarez-Pallete, executive president of the company, outlined the new strategic plan in his previous meeting with analysts.
Units like Telefónica Tech, created in 2019, were destined to be stars of the day. The division that brings together value-added services, cybersecurity, internet of things... is one of the most attractive of the new Telefónica. But it won't be like that.
If the markets expect anything on November 8, it is for Telefónica to provide clarity on its corporate governance.
On September 5, Saudi Telecom (STC) announced that it had acquired 4.9% of Telefónica shares and that it had another 5% in derivatives deposited in Morgan Stanley.
Although the operation was orchestrated with complete opacity and Telefónica management claims to have found out a few hours before it was announced to the market, the company described it as “friendly” that same afternoon. But, despite the thunderous silence that has resonated from Las Tablas since then, the tension that the operation unleashed is undeniable. With 9.9% of the capital, Telefónica's control structure could change if the Saudi fund tried to exercise its voting rights and demand a presence on the board of directors. At the moment, it has not done so.
Álvarez-Pallete flew to Saudi Arabia as soon as he heard the news. Among the main shareholders, BBVA (4.8%) and Caixabank (3.5%), there was concern. In the Government, much more. From the first moment, Telefónica's strategic nature was highlighted. This implies that any shareholder must obtain authorization from the Government if they acquire 5% of its capital.
Defending the Spanish core of command has become a priority objective for the Government. To such an extent that the Spanish Society of Industrial Properties (SEPI) has confirmed that it is considering whether public capital will once again be a shareholder.
Will Álvarez-Pallete be able to offer the markets a convincing explanation about the company's future? This is the big doubt. What is certain is that he will resort to a classic: “We have been warning about this.” The manager has been denouncing for years that the regulation of the sector especially harms operators that invest the most in infrastructure, such as Telefónica. At the close of this edition, Telefónica's share was worth 3.80 euros, when at the time José María Álvarez-Pallete was appointed president of Telefónica, on April 8, 2016, it was close to 10 euros. The drop is close to 60%, despite the fact that during his term the debt has been reduced by almost half, from 56.1 billion in 2016 to 26.7 billion.
Investor Day in 2023 promised to be a turning point in this trend. The stock has risen 8.3% since January and the drums of regulatory change that sound in Europe to facilitate mergers that allow the consolidation of large conglomerates were pointed out as the foundations of change.
