Saudi Telecom buys 9.9% of Telefónica and will be the first shareholder

STC Group, also known as Saudi Telecom, has acquired a 9.

Oliver Thansan
Oliver Thansan
05 September 2023 Tuesday 10:43
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Saudi Telecom buys 9.9% of Telefónica and will be the first shareholder

STC Group, also known as Saudi Telecom, has acquired a 9.9% stake in Telefónica, making it the company's main shareholder, ahead of CaixaBank, BBVA and BlackRock, which have 4.8%. each of them.

The Saudi group, which is the reference in its country both in telecommunications and in 5G and artificial intelligence developments, has announced in a statement that its investment is "long-term" and has shown its confidence in Telefónica's strategy and in its management team, led by José María Álvarez-Pallete.

The current value on the stock market of Telefónica is 21,330 million euros and the recently acquired stake, according to what the buyer himself has revealed, reaches 2,100 million euros. Saudi Telecom insists that "it has no intention of acquiring control or majority stake" in the Spanish group.

One of the elements that have encouraged him to bet on the Spanish company is its presence, in addition to Spain, in Germany, the United Kingdom and Brazil, which makes it "one of the largest telecommunications companies in the world".

The investment is articulated through the purchase of a direct 4.9% and the subscription of financial instruments for another 5%. As soon as it obtains the necessary regulatory permits, it intends to exercise the political rights equivalent to this 5%.

The current board of directors of Telefónica, in which top-level executives such as Isidro Fainé (Criteria Caixa) or Francisco J. Riberas (Gestamp) sit, is made up of 17 members and, initially, the threshold to request a director part of 5.8% capital. It only has two Sunday members, who are Fainé and José María Abril, representing BBVA.

The participation acquired by the Saudi group is not accidental because the anti-takeover shield created by the Government to prevent the purchase of strategic companies allows the Council of Ministers to veto the entry of a non-EU investor in a Spanish listed company when it takes more than 10% of the capital.

Saudi Telecom is in the midst of an expansion process and appreciates "upside potential" in Telefónica, among other things because "it has a unique portfolio of infrastructure assets and cutting-edge technology platforms, where it is developing activities in adjacent areas such as cognitive intelligence, edge computing and IoT (internet of things)”.

The Saudi company is listed on the Riyadh stock market and has a capitalization of 49.2 billion euros, that is, slightly more than double that of Telefónica. However, what it lacks is the international presence that the Spanish group does have.

Recently, Saudi Telecom acquired telecommunication towers in Bulgaria, Croatia and Slovenia through its subsidiary Tawal. Its president is Mohammed K. A. al Faisal, who is in charge of Al Faisaliah Group Holding, one of the country's great investment vehicles, created in 1969 and with interests ranging from beverages to petrochemicals through medicine.

“Telefónica and STC Group share many similarities, they have the same vision of the use of technology”, stated the president of Saudi Telecom. The operation "is aligned with our growth strategy", he indicated.

“We have no intention of acquiring control or a majority stake in Telefónica. This is a great investment opportunity that allows us to use our solid balance sheet and maintain our attractive dividend policy," says Olayan Alwetaid, CEO of the Saudi company in the statement issued yesterday.