Saudi company buys Telefonica stake

SAUDI telecommunications group STC paid €2.1 billion for a 9.9 per cent stake in Telefonica on September 5.

The 9.9 per cent acquisition is the maximum holding allowed for foreign investment in a Spanish company quoted on the country’s stock exchange.  This is in line with takeover legislation introduced during the covid pandemic to protect Spanish companies operating in strategic sectors.

STC is 64 per cent controlled by the Saudi state and the transaction makes the group Telefonica’s largest shareholder ahead of the BBVA bank which has a 4.87 per cent holding.  The US investment firm Blackrock holds another 4.48 per cent, followed by CaixaBank with 3.5 per cent.

Telefonica shares were listed at €3.75 each on September 5, with a capitalisation of just over €21 billion, suggesting that STC paid the market price although no details of the deal were revealed during the official announcement.

“Our investment demonstrates confidence in Telefonica’s leadership, strategy and ability to create value,” Olayan Alwetaid, STC’s chief executive said. “As long-term, supportive shareholders, we are committed to strengthening our partnership.”

The Saudi company also stressed that it did not intend to acquire control of Telefonica or a majority stake in the multinational

“Rather we see this as a compelling investment opportunity to use our strong balance sheet while maintaining our dividend policy,” Alwetaid declared.

The operation is also seen as an endorsement of Telefonica’s management team, which has been hit by a fall in its share price in recent years.  The company has also had to cope with setbacks linked to its international business interests in Latin America, the UK and Germany.

Telefonica shares and those of its Telefonica Deutschland subsidiary suffered an unexpected blow in August after Germany’s 1&1 mobile and broadband provider, agreed a deal for Vodafone to provide 5G coverage for its customers instead of Telefonica Deutschland.

STC is quoted on the Saudi Arabia stock market and is worth €49.2 billion, reporting a total income of $17.9 billion  (€16.3 billion) in 2022, a 7 per cent increase on 2021.  During that period, the group’s profits increased by 7.6 per cent to $3.2 billion (€2.9 billion).