The management leadership of Telefónica and Saudi Telecom Company (STC), controlled by the sovereign wealth fund of Saudi Arabia, met yesterday in Madrid at the headquarters of the Spanish operator in District C, to bring closer positions between both companies.
Among other points of the meetings, with the presence of the top executives of the two companies, José María à lvarez-Pallete and Olayan Alwetaid, both parties discussed the possible entry of a representative of the Saudi operator into Telefónica. Sources from the Spanish company did not want to comment.
The meeting comes after an intense week in the telecom sector, with the celebration of the Mobile World Congress (MWC) in Barcelona, where both Telefónica and STC had a notable presence. The Arab group, among other initiatives, announced an alliance with the giant China Mobile in the world of the internet of things. Telefónica, which presented its annual results last week, is already preparing the next shareholders meeting, in which possible changes to the board of directors would be discussed.
The two managers currently have a closer relationship due to their positions in the main associations in the sector. Thus, Pallete chairs the board of directors of the GSMA telecom employer's association, of which Olayan Alwetaid is also a member.
STC announced at the beginning of September the purchase of 9.9% of Telefónica's capital, with a historic investment of 2.1 billion euros, which would make the group the main shareholder, ahead of BBVA and CaixaBank, members of the historic hard core. of the company. The operation was carried out with the acquisition of 4.9% in shares directly, and another 5% in derivatives. STC must receive permission from the Spanish Government to exceed 5% and reach 9.9%, given the strategic nature of Telefónica in matters of security and national defense.
In this sense, other sources in the sector do not rule out that those responsible for STC have also held meetings with the Spanish authorities, taking advantage of their presence in Spain.
With the 4.9% it already has in its hands, a participation similar to that held by BBVA and CaixaBank, STC could have the right to appoint a director in Telefónica.
For now, the Arab group has supported the management of the Spanish operator. Last September, when the entry was announced, STC said its investment reflected confidence in Telefónica's management team, its strategy and ability to create value. Last November, the Spanish group presented its new strategic plan, with forecasts for revenue growth between 2024 and 2026, with a dividend in this period of at least 0.30 euros per share.
The scenario, in any case, remains open, waiting for the State Society of Industrial Participations (SEPI) to proceed to execute the Government order for the purchase of up to 10% of the capital, as communicated on the 19th. from December. This week, the Minister for Digital Transformation and the Public Service, José Luis Escrivá, announced the creation of the State Society for Technological Transformation (SETT), a public company in which the Government intends to group its different technological assets, with the option for this company to be the vehicle that channels public investment in Telefónica in the future.
Last week, Pallete stated that the company had no news about either STC or SEPI. In a meeting with the media after the presentation of the 2023 accounts, the executive said he had no evidence that the Saudi telecom company had submitted a request for approval to the Government to reach 9.9% of the capital, and added It is good that there are investors who find Telefónica and its business plans attractive. Now, with the meeting, this scenario has changed.
In addition, STC has once again boasted of its presence in Telefónica's capital, in this case, highlighting both the international expansion of the Spanish group and its shareholder remuneration policy. In its annual financial report, published this week, the Saudi telecom explains that Telefónica is one of the main European operators, with a presence in three of the largest markets on the Old Continent, Spain, Germany and the United Kingdom, in addition to Brazil, the largest market in Latin America.
Similarly, STC points out that, during the third quarter, it completed the purchase of 4.9% of Telefónica's capital, and indicates that, in the fourth quarter, it received 173 million rials (more than 42 million euros) in concept of the dividend paid by the Spanish operator, of 0.15 euros per share. An amount that could double if it finally reaches a 9.9% stake.
The Saudi company also explains that it has contracted a guarantee, until obtaining approvals from the regulatory authorities – expected within a year – before the group signs a purchase and sale agreement with a group of international investment banks, to acquire that additional 4.9% stake in Telefónica. In addition, STC has entered into an options agreement to protect against the risk of price declines in relation to its investment in Telefónica, with a hedge ratio of 1 to 1.
Telefónica shares rose 0.80% this Friday, after midday, to 3.82 euros. Since the beginning of the year, the matilde's they revalue more than 5%.
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