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Spain Analizes Saudi Telecom’s Plan to Become Telefonica SA’s Largest Shareholder

Spanish Prime Minister Pedro Sanchez said that the government of this country is currently studying the prospects for the implementation of the intention of Saudi Telecom to become the largest shareholder of Telefonica SA.

Spain Analizes Saudi Telecom's Plan to Become Telefonica SA’s Largest Shareholder

The Prime Minister noted that the analysis of the potential prospects associated with the plan of the Saudi provider of digital telecommunications services is carried out within the framework of a paradigm in which openness to foreign investment is an important factor and concerns about the excessive influence of other states on Spanish companies and the country’s economy as a whole remains an equally important issue.

Pedro Sanchez said that the government is studying the intention of Saudi Telecom on Friday, September 15, at an event held in Madrid. He stated that the country’s leadership will guarantee the provision of national defense and security in the broad sense of these definitions. The Prime Minister also noted that the government will take measures so that the volume of foreign investment does not exceed the limit beyond which excessive external influence on strategic companies begins or access to critical technologies is provided.

At the same time, Pedro Sanchez said that the interest of large international investors in firms and brands from Spain is always good news. At the same time, he did not specify which transactions on international financial and technological cooperation he had in mind in this context.

Saudi Telecom is going to acquire almost 10% of Telefonica shares for about $2.25 billion. The telecom operator based in Madrid is interested in financial injections since its current position is far from ideal. The Spanish company is now preparing to create a new strategy for future growth. According to experts, the intentions of the Saudi supplier of digital telecommunications can be described as a kind of test of Europe’s readiness to interact with foreign investors.

If the Spanish authorities approve the deal, Saudi Telecom will become the largest shareholder of Telefonica, having received a share exceeding the degree of financial involvement in the activities of the telecom operator from Banco Bilbao Vizcaya Argentaria SA, Blackrock, and CaixaBank SA. All the listed organizations have a share of less than 5%.

At the beginning of the coronavirus pandemic, the Spanish leadership decided to restrict the investment activities of foreign legal entities not from the EU in the country. This measure was justified by efforts to protect companies, the value of which, against the background of an extremely unfavorable epidemiological situation, showed a sharp drop.

Over time, the Spanish government has made changes to the rules of investment. As a result of these actions, the share of shares, the acquisition of which requires permission from the authorities, was reduced from 10% to 5% for companies whose activities are related to the defense sector.

Pedro Sanchez said that the Spanish government has the tools necessary to protect the national sovereignty of the country and the strategic interests of the state. Separately, he noted that in this context, control in the field of security and defense is of particular importance. The Prime Minister also said that Spain’s legislation on regulating the volume of foreign investment is one of the strictest in the EU.

Telefonica is a supplier of systems and equipment for the Spanish Armed Forces and the Ministry of Defense. This is reported by the media with reference to the data of the government of the country. Against the background of the Prime Minister’s statements, the value of the telecom operator’s shares has practically not changed. Since the beginning of 2023, this financial indicator has increased by about 16%.

During his speech at Friday’s event in Madrid, Pedro Sanchez paid special attention to the development of free trade. In his opinion, the EU should start a new commercial expansion, the basis of which is the consolidation and diversification of ties abroad. He noted that this expansion should have the main goal of cooperation with those countries that share European principles, values, and interests.

The Saudi company’s potential ownership of a stake in Telefonica of 4.9% of shares and an additional 5% due to financial instruments has become the subject of discussions on the protection of strategic assets.

Saudi Telecom is currently the largest telecommunications company in Saudi Arabia. Most of the business belongs to the sovereign wealth fund, which Crown Prince Mohammed bin Salman sees as a tool to rid the economy of dependence on oil.

Telefonica called Saudi Telecom’s decision friendly. The company noted that the potential investor supports the telecom operator’s strategy and ability to create value.

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Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.