Saudi Telecom Company (STC) acquired 9.9 percent of Telefonica at a value of 2.1 billion euros ($2.25 billion), in a move that makes it the largest shareholder in the giant Spanish telecom company.
STC, the largest telecom operator in the Kingdom, revealed the investment today, Tuesday, after the close of trading. The stake consists of 4.9 percent of Telefonica’s shares, and financial instruments give it another five percent.
STC said it intends to acquire the voting rights of those 5 percent it acquired through financial instruments after obtaining regulatory approval.
“This deal constitutes a promising investment opportunity that allows us to make optimal use of our solid financial position, while continuing the approved dividend policy,” said Olayan Al-Wateed, CEO of the Saudi Telecom Company, in a statement, adding that it does not intend to acquire a controlling or majority stake.
Telefonica said it was notified of STC’s investment today and described it as “welcome”.
Two sources familiar with the matter told Reuters that STC built up the center with the help of US investment bank Morgan Stanley.
They added that Linklaters assumed the role of legal advisor to the Saudi company, while Allen & Overy was an advisor to Morgan Stanley.
Morgan Stanley, Linklaters and Allen & Overy declined to comment.
The Saudi Telecom Company is the largest telecom operator in the Kingdom and owns stakes in companies operating in Kuwait and Bahrain.
The company is 64 percent owned by Saudi Arabia’s sovereign wealth fund, the Public Investment Fund.
Gulf telecom groups are increasing their investments abroad, as E&E raised its stake in Vodafone Group in March to 14 percent.
For STC, the investment in Telefonica is its second foray into the European telecom market after it agreed to buy 1.2 billion euros worth of tower infrastructure from United Group in April.
Telefonica will present a new strategic plan on November 8 that focuses on boosting the company’s free cash flow, which the chief executive said could reach 4 billion euros ($4.3 billion) this year.
Telefonica, like its European competitors, has faced pressure on earnings due to stiff competition and the need for huge investments in 5G mobile technology infrastructure. It sold stakes in more mature companies such as submarine cables or mobile towers to finance fifth generation networks and fiber optics.
Telefonica’s shares ended today’s trading at 3.75 euros, making its market capitalization about 22 billion euros. The company was valued at more than 110 billion euros when it peaked back in 2008.
Until last year, Spanish bank BBVA was Telefonica’s largest shareholder, with a 4.9 percent stake.
2023-09-06 04:07:52
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