Spain is analyzing the purchase of the Saudi Telecom Company (STC) for a 9.9 percent stake in the Spanish telecom company, Telefonica, to ensure that its strategic interests are not compromised, which raises the possibility of an obstacle to the completion of the move.
And the Spanish Acting Minister of Economy, Nadia Calvinho, said, on Wednesday, in Brussels that (STC) contacted the Spanish government, on Tuesday, to inform the deal that will make the Saudi company the largest shareholder in the Spanish telecom company.
“Telefonica is a strategic company for our country and as a government, we will apply all necessary mechanisms to give priority to defending our strategic interests,” Calpinho told reporters, when they asked her about the Saudi company’s move.
Madrid can block STC’s purchase of a stake in Telefonica, which provides services to Spain’s defense industry, and the government can interfere with acquisitions of stakes of more than 5 percent.
An official familiar with the government’s thinking said Madrid would “exercise its power” to approve or reject the operation, knowing it had oversight power due to Telefonica’s links to the national defense.
“Public oversight of strategic companies is an urgent issue from a democratic and security point of view,” said Euni Pilara, Acting Minister for Social Rights on the X platform, previously on Twitter.
Bellara added that the state holding company (SEBI) should acquire a 10 percent stake in Telefonica within the next few years to “lead the digital transformation”.
In a statement, the General Federation of Workers welcomed STC’s move, describing it as “a capital flow that enhances everything related to the company’s future investments… which guarantees the future of its workers.”
But Spain’s largest trade union called for “caution and (a sense of) responsibility” and promised to remain vigilant of the Saudi company’s next actions.
STC said on Tuesday that it had bought a 9.9 percent stake in Telefonica at a value of 2.1 billion euros ($2.25 billion), following the approach of other companies in the Middle East to invest in telecom companies in Europe and Latin America.
STC is Saudi Arabia’s largest telecom operator and is 64 percent owned by the Public Investment Fund, the kingdom’s sovereign wealth fund. The fund is the main driver of the 2030 vision of Saudi Crown Prince Mohammed bin Salman to transform the economy away from its dependence on oil.
At the same time, European telecommunications companies such as Telefonica are struggling to pay off their large debts in light of the slowdown in the growth of the telecommunications sector and the huge investments to keep pace with the latest technologies such as the fifth generation technology.
It has tried to raise money from the sale of its administrative headquarters, pressed the European Commission to allow market consolidation and battled technology companies to get them to fund infrastructure investments.
Telefónica’s total debt is about twice its market value, which is around 22 billion euros.
“This provides a much-needed boost to Telefonica in light of the huge investment to roll out 5G broadband networks in key markets,” said Paolo Pescatori, analyst at BB Foresight.
He added that this will provide opportunities for both companies to work more closely to create greater efficiency and launch new products globally.
The government introduced legislation to prevent takeovers of 10 percent or more in listed companies by entities outside the European Union and not affiliated with the European Free Trade Association, to try to prevent hostile takeovers of companies whose value has declined since the COVID-19 pandemic.
The threshold at which the government can get involved was recently lowered to 5 percent for defense-related companies.
Calvinho said that Madrid is analyzing the application of defense mechanisms related to the deal, the telecommunications sector, the relationship to Spain’s security and defense, the STC stake, the exercise of voting rights and participation in the board of directors and in other departments related to decision-making in the company.
“Fortunately, since we reached the government, we have strengthened the mechanisms to protect our strategic interests,” she added.
Telefonica is listed as a defense provider on government websites for supplying “systems and equipment” to the military and satellite services for the Defense Ministry’s space arm.
2023-09-06 21:06:17
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