The Saudi telecommunications operator Saudi Telecom Company (STC) is taking firm steps to consolidate and increase its stake in Telefónica, in a move that could redefine the ownership landscape of the Spanish teleco.
Request for increased participation and expectations
STC expects the Spanish government to soon approve its request to reach a 10% stake in Telefónica. This request, submitted at the end of June, is currently being analyzed by the government, which has a three-month deadline to make a decision. The Ministry of Defense is leading the approval process due to the strategic nature of Telefónica as a service provider for the ministry.
Beyond 10%: Growth ambitions
What is even more significant is that STC does not rule out increasing its stake above 10% in the future. In fact, according to sources close to the operation, the Saudi company is confident it will reach 9.9% and plans to buy more shares until reaching a ceiling of 15%. This strategy would make STC the largest shareholder of Telefónica, surpassing even the State Industrial Holdings Society (SEPI), which currently holds 10% of the share capital.
High-level meetings and transparent dialogue
Last Thursday, STC CEO Olayan Alwetaid met with Spanish Economy Minister Carlos Cuerpo. This meeting, which the minister himself announced through social media, was described as part of a “transparent, ongoing, and close dialogue.” The meeting is seen as a further step in the intensification of negotiations between the Spanish government and STC to approve the Saudi company’s entry into Telefónica.
Implications for the market and management
The potential entry of STC with such a significant stake has had a positive impact on the market. Telefónica’s stock has experienced a 22% increase so far in 2024, reflecting investors’ optimism about these developments.
However, this situation also poses challenges for Telefónica’s management. The entry of such a major shareholder could imply changes in the Board of Directors and the company’s long-term strategy.
Geopolitical and strategic context
It is important to note that STC’s main shareholder is the Saudi Sovereign Fund, adding a geopolitical dimension to the operation. The Spanish government will need to carefully consider the strategic implications of allowing such a significant foreign fund to have a stake in a key player in national telecommunications.
In summary, the impending decision of the Spanish government on STC’s participation in Telefónica will mark a significant milestone in the recent history of the teleco. If approved, as expected, it could open the door to greater Saudi influence in one of the pillars of Spanish and European telecommunications. Balancing foreign investment attraction and protecting national strategic interests will be crucial in the next steps of this operation.