The announcement on Tuesday evening of the purchase of 9.9% of Telefónica by Saudi Telecom put the central Government and the management of the Spanish company on guard yesterday. If from the Executive, informed of the move without advance notice, the message consisted of a forceful appeal to the importance of protecting "strategic sectors and interests", in the company there was also an infrequent reaction: its president, José María Álvarez-Pallete, took a plane with the CEO, Ángel Vilá, to meet with the leadership of the Saudi company.
From Brussels, the acting first vice-president, Nadia Calviño, pointed out that "all the mechanisms" will be applied to protect "strategic sectors and interests". After being informed of the "friendly nature" of the operation and that the Saudi investor does not aspire to take control of the Spanish company, the Government will now analyze "all relevant issues" of the operation, he said.
The ability of the Spanish Government to veto this investment comes from a royal decree approved this year, 571/2023, article 18 of which requires the approval of the Council of Ministers for acquisitions of shares in defense-related companies above 5% The investor can take up to 9.9%, but without exercising political rights over this additional part of the stake, unless the Government gives its approval. Telefónica, as a supplier to the Ministry of Defence, has been included in the list of companies subject to these limitations.
Saudi Telecom was already aware of this possible veto and, for this reason, has precisely measured the entrance to Telefónica. He has bought less than 10%, since above this threshold the anti-opex shield approved by the Government during the pandemic would pose a problem, and at the same time he has only bought 5% directly from the Spanish company. The remaining 4.9%, pending what the Government decides, is currently parked through derivatives, that is, future purchase rights.
The operation has a total amount of 2.1 billion euros and is particularly relevant because it will make Saudi Telecom the first shareholder of the Spanish group, in front of CaixaBank, BBVA and BlackRock, which each declare separately a 4.8% of capital The new shareholder has as its first shareholder, with more than 60%, the Saudi State through the PIF sovereign fund, one of the largest in the world, dedicated to reinvesting the enormous income obtained in the country from oil production.
The confusion surrounding yesterday's movements, in which Saudi Telecom acknowledged that it had informed the central government on Tuesday night and in which Telefónica did not come to pronounce with determination - it limited itself to saying that "it has taken note" in a communication sent to the CNMV –, they kept the market undecided. Telefónica's shares rose almost 2%, but ended up 0.27%. The company is capitalized at 21,627 million, less than half of Saudi Telecom's almost 50,000 million value.
For now, the Saudi group says it has no intention of joining Telefónica's board of directors and is dedicated to supporting the group's strategy and the management of the current managers. "We are still in the early stages of our investment and we trust the current management team of Telefónica, so it is too early to talk about these matters", say sources from the Saudi company.
However, there are some signs that Saudi interest goes beyond financial investment. At the beginning of the year, the two companies already signed a strategic collaboration agreement and the senior managers of the two corporations know each other well. Of the fifteen members of Saudi Telecom's management committee, all are Arabs, except for one, the Spanish José del Valle, who in the past was CEO of Telefónica Media Networks.
Álvarez-Pallete, whose presence was planned in California before going to Saudi Arabia, battle, since he came to the position of president in 2016, to reduce the debt and look for formulas with which to improve the value of the group . Since the beginning of 2016, with a pandemic in the middle, the value of the share has fallen by 60%, but the group is recovering and has achieved a revaluation of 9% since January.
Telefónica's intention is to present two months from now, in November, a new strategic plan until 2026, and for this reason it will convene the first capital market day in a decade.
The good industrial harmony with Saudi Telecom is appreciated in areas such as the GSMA association, the organizer of the Mobile World Congress in Barcelona, on whose board Álvarez-Pallete and the CEO of Saudi Telecom, Olayan Mohammed Alwetaid, share a seat. The Saudi group became one of the partners with which Telefónica covers more than 65 markets in Europe, Latin America, the Middle East and Africa.
The purchase of 9.9% of Telefónica is Saudi Telecom's first acquisition in Spain. It has a presence in Kuwait, Bahrain, Malaysia and, more recently, in Bulgaria, Croatia and Slovenia, thanks to the acquisition of telecommunications towers by the subsidiary Tawal.
From Saudi Telecom they say that the investment in the Spanish company is "long-term" and that they see great potential in the international implementation of Telefónica, present in Germany, the United Kingdom and Brazil.
The operation had political resonance yesterday. The president of the PP, Alberto Núñez Feijóo, said that Telefónica is "strategic" for Spain and was confident that it will continue with a majority of Spanish capital. Acting minister Ione Belarra proposed that Sepi buy 10% of Telefónica.
