Spain examines Saudi group’s stake in Telefonica

Madrid — Spain is analysing Saudi Arabian group STC’s purchase of a 9.9% stake in Telefonica to ensure its strategic interests are defended, acting economy minister Nadia Calvino said on Wednesday, signalling a potential hurdle.

STC contacted the Spanish government on Tuesday to inform it of the deal, which would make STC the Spanish telecom’s largest shareholder, Calvino said in Brussels.

“Telefonica is a strategic company for our country and as government we will apply all the mechanisms that are necessary to prioritise the defence of our strategic interests,” Calvino told reporters when asked about STC’s move.

STC is Saudi Arabia’s largest telecom operator and is 64% owned by Saudi Arabia’s Public Investment Fund (PIF), the main engine of Crown Prince Mohammed bin Salman’s Vision 2030 to wean the economy off its dependence on oil.

In a bid to protect companies whose value has plummeted since the Covid-19 pandemic from hostile takeovers, the Spanish government has had the power to block acquisitions of stakes of 10% or larger in listed companies by entities from outside the EU and European Free Trade Association.

Calvino said Madrid is analysing the application of the relevant defence mechanisms, the sector, its relation with Spain’s security and defence of Spain, STC’s shareholding, the exercise of voting rights and the participation in the board or other decision-making bodies of the company.

“Fortunately, since we arrived in government we have reinforced the mechanisms for protecting our strategic interests,” Calvino added.

The threshold at which the government can intervene was recently lowered to 5% for companies related to defence. Telefonica is listed as a defence provider on government websites, supplying “systems and equipment” to the army and satellite services to the defence ministry’s aerospace arm.

The government must ensure the decision-making of a company that handles sensitive data remains in Spain, acting labour minister Yolanda Diaz said on social media platform X, formerly known as Twitter.

STC said on Tuesday evening that it has built up a 9.9% stake in Telefonica worth €2.1bn.

Telefonica said it was informed of STC’s investment on Tuesday, describing it as “friendly”.

STC’s holding consists of 4.9% of Telefonica’s shares and financial instruments that give it another 5% in economic exposure to the company. STC said it plans to secure voting rights for that 5% interest held through financial instruments after receiving regulatory approvals.

Reuters