Spain to acquire stake in local carrier Telefonica

The Spanish government will acquire the stake in Telefonica via state holding SEPI

The Spanish government approved the acquisition of up to 10% of the capital of Spanish operator Telefónica, which would make it the majority shareholder of the operator.

Spain plans to buy the stake through state-owned holding company SEPI.

The move by the Spanish government follows a 9.9% stake taken by Saudi Arabian telecoms company STC (which is majority-owned by Saudi Arabia’s sovereign wealth fund) earlier this year.

Once the stake acquisition is completed, the state will have the right to one or two members on the board of directors and will become the majority shareholder ahead of BBVA, CaixaBank, Saudi Telecom Company (STC) and the BlackRock fund.

At market prices, this potential stake is valued at around €2 billion ($2.19 billion). The Spanish government has justified the acquisition due to the strategic nature of the company and the contracts it maintains in the defense area.

“The participation of SEPI will allow Telefónica to provide greater shareholder stability so that the company achieves its objectives and, therefore, will contribute to the safeguarding of its strategic capabilities,” SEPI said in the statement.

The state company also highlighted that it will proceed “to carry out the procedures and actions that allow the process to be launched to complete the acquisition of the necessary volume of shares.”

In a stock market statement Telefonica acknowledged the upcoming purchase, noting it was focused on its recently approved strategic plan and aimed to “continue creating value for its shareholders and providing the best-in-class service for its clients.”  

In September, Saudi Telecom Company has purchased a 9.9% interest in Telefónica for €2.1 billion to further its growth ambitions outside of Saudi Arabia. The stake, said the company, is comprised of 4.9% of Telefónica’s shares, as well as “financial instruments giving economic exposure to a further 5% of Telefónica’s share capital.”

STC said it plans to convert those instruments into shares but noted that it requires official approval to do so. Government authorization is needed for any foreign investor taking a stake of 5% or more in certain “strategic” defense companies, it explained, adding that Telefónica’s businesses related to national security and cyber defense puts it in that category.