Riyadh, Saudi Arabia / Madrid, Spain – September 6, 2023 — Saudi Arabia’s largest telecommunications operator, STC Group, has made a strategic move by acquiring a substantial 9.9% stake in Telefonica, a prominent Spanish telecom giant. This significant investment, valued at approximately 2.1 billion euros (around $2.25 billion USD), positions STC as the leading shareholder in Telefonica.
Strategic Investment in Telefonica The stake acquired by STC comprises 4.9% of Telefonica’s shares, along with financial instruments that provide an additional 5% in terms of economic exposure to the telecom company. STC intends to secure voting rights for this 5% interest, subject to obtaining regulatory approvals.
Maintaining a Strategic Approach STC’s CEO, Olayan Alwetaid, has emphasized that this investment does not indicate an intent to assume control or acquire a majority stake in Telefonica. Instead, STC views this move as a compelling investment opportunity, leveraging its strong financial position while continuing to adhere to its dividend policy.
Friendly Transaction Telefonica acknowledged STC’s investment as “friendly.” The Spanish telecom company was informed of this development on Tuesday.
Collaboration with Morgan Stanley STC partnered with U.S. investment bank Morgan Stanley to build this stake in Telefonica. However, the financial specifics of the collaboration were not disclosed.
Market Response Following the announcement, Telefonica’s shares experienced a positive response, with a 2.9% increase in their trading value, reaching 3.86 euros. STC’s shares, on the other hand, saw a modest 0.1% rise in Riyadh, trading at 39.60 riyals.
Saudi Telecom Company’s Expansion STC, a major player in Saudi Arabia’s telecommunications sector, has expanded its presence internationally, including ownership of subsidiaries and stakes in companies operating in Kuwait and Bahrain. The company is primarily owned by Saudi Arabia’s Public Investment Fund (PIF), playing a significant role in Crown Prince Mohammed bin Salman’s Vision 2030 initiative to diversify the Saudi economy away from oil dependency.
Telefonica’s Strategic Direction Telefonica is gearing up to unveil a new strategic plan on November 8, focusing on enhancing the company’s free cash flow. Its CEO has indicated that this cash flow could potentially reach 4 billion euros by the end of the year. Like many European telecom companies, Telefonica has encountered challenges related to profitability, stemming from intense competition and substantial investments in 5G technology infrastructure. To fund these initiatives, Telefonica has divested stakes in mature businesses such as submarine cables and mobile masts.
Market Dynamics Telefonica’s current market capitalization stands at approximately 22 billion euros, a significant decrease from its peak valuation of over 110 billion euros in 2008. Notably, Spanish bank BBVA was Telefonica’s largest shareholder as of last year, holding a 4.9% stake.