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Spanish fund plans stake in Telefonica after STC move

Saudi telecom STC became the largest shareholder in Spain's Telefonica in September Reuters/Faisal Al Nasser
Revenue reached a record high of SAR72.33 billion in 2023, up 7.3 percent year on year

Spain’s state fund Sepi said on Tuesday it is considering whether to buy a stake in Telefonica, a month after Saudi Arabia’s STC built a 9.9 percent holding in the telecoms group.

STC, Saudi Arabia’s largest telecom company, became Telefonica’s largest shareholder in September, building a stake worth €2.1 billion ($2.23 billion) through shares and convertible financial instruments.

Acting economy minister Nadia Calvino has said Madrid will carry out a thorough evaluation before approving STC’s stake, while acting labor minister Yolanda Diaz has called for the transaction to be blocked.

Because Telefonica is considered a defence service provider and a strategic company, the Spanish government has a say in acquisitions and holdings between five percent and 10 percent.

Spain’s Sepi said in a stock market filing on Tuesday that it was carrying out an “exploratory internal analysis over a potential acquisition” of a stake in Telefonica.

The analysis did not imply any decision on an acquisition, Sepi president Belen Gualda Gonzalez said.

STC declined to comment on any potential plans by Sepi.

Major shareholders in Telefonica welcomed STC’s investment and ruled out increasing their own stakes.

BBVA chief executive Onur Genc said on Tuesday the Spanish bank, which is a leading Telefonica shareholder, had no plans to raise its current 4.87 percent stake.

“It’s a financial stake for us, not a strategic stake. It’s a stake (held as) available for sale in the accounting books and we are not looking to increase our shares at all,” Genc said.

He would not comment on any potential acquisition by the Spanish state, beyond saying that “from a financial perspective, it is great that investors are showing interest in a company of such importance of Telefonica”.

Caixabank, which owns 3.5 percent stake of Telefonica, said last week it would not raise its stake in response to STC’s move, and would analyse with Telefonica any potential cooperation with the Saudi Arabian telecoms company.