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Spain declared it was aligned with Saudi investor STC on “supporting” an overhaul at Telefónica, as the Gulf group seeks a board seat after ousting the telecoms company’s chair in concert with Madrid.
Carlos Cuerpo, Spain’s economy minister, told the Financial Times in Davos this week that the government, STC and other shareholders had a “common” long-term strategy for Telefónica, the Spanish telecoms champion valued at €21bn.
Telecoms group STC, which is majority owned by Saudi Arabia’s sovereign wealth fund, said on Friday that it had executed a long-standing plan to raise its Telefónica stake to 9.97 per cent. It also said it wanted a seat on the 15-member board.
The announcement capped days of controversy over the ousting of José María Álvarez-Pallete, chair since 2016, who was told he would be sacked last Friday in a meeting at the offices of Prime Minister Pedro Sánchez. The board fired him on Saturday.
His departure was instigated by the government, which holds 10 per cent of Telefónica through a state holding company, in alliance with STC. They subsequently won the support of CriteriaCaixa, the investment arm of a foundation linked to CaixaBank, which also owns 10 per cent.
“Criteria, STC, the government and others we’ve talked to have a clear medium to long-run vision and strategy for supporting Telefónica,” Cuerpo said. “That’s a common line.”
Spain’s conservative opposition, which regularly accuses Sánchez of subverting Spain’s institutions to his own interests, said his Socialist-led government was guilty of intolerable meddling in a private company.
“The main stakeholders decided it was time to enter a new phase in terms of the industrial strategy of the company and this is why we decided to go for a new president,” Cuerpo said.
Álvarez-Pallete has been replaced by Marc Murtra, an executive close to the government. Murtra was until last week chair of Indra, a Spanish defence group known for its radar systems in which the state has a 28 per cent stake.
During Álvarez-Pallete’s nine years at the helm, Telefónica’s shares dropped roughly 50 per cent at a time when the European telecoms sector was struggling.
“Telecommunications is a strategic sector going ahead in terms of cyber security [and] AI,” Cuerpo said. “There are many implications there where we will need to have leading companies at the EU level. We want Telefónica to be one of them.”
In a filing with the US Securities and Exchange Commission, STC said it had acquired a 9.97 per cent stake in Telefónica via Luxco, also known as Green Bridge Investment Company, an entity wholly owned by STC.
In September 2023, the Saudi group shocked corporate Spain by revealing it had built a 4.9 per cent stake in Telefónica and purchased derivatives that gave it exposure to another 5 per cent of its shares. It requested Spanish government permission to increase its stake to nearly 10 per cent via the derivatives. Spain granted that permission in November last year.
In its filing, STC said “Luxco plans to engage in discussions with [Telefónica] to seek a board seat”.
It added that it “may from time to time” engage in discussions with Telefónica about “potential business combinations and strategic alternatives, the business, operations, capital structure, governance, management [and] strategy” of the company, although it had no current plans to do so.
STC began looking for opportunities to expand beyond its core Gulf market as the PIF, Saudi Arabia’s sovereign wealth fund, seeks to help diversify the country’s oil-dependent economy. STC has said it is interested in Telefónica’s cutting-edge technology in areas such as cognitive intelligence.
