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STC rules out increasing Telefonica stake to 9.9%

Saudi's STC Group purchased 9.9% of Spain's Telefonica for $2.25bn but 5% is in derivatives Reuters
Saudi's STC Group purchased 9.9% of Spain's Telefonica for $2.25bn but 5% is in derivatives

Saudi Arabia’s largest telecom operator STC Group will maintain a 4.9 percent stake in Spain’s Telefonica and has no plans to convert the five percent it holds in derivatives into voting shares, Spanish El Economista news outlet reported, citing informed sources.

STC acquired a 9.9 percent stake in Telefonica for SAR8.5 billion ($2.25 billion) as part of its global expansion drive in September.

The investment makes the Saudi-listed company the top shareholder in the Spanish telecom major after Spanish bank BBVA’s 4.9 percent holding.

“Telefonica and STC Group share many similarities, with a vision to use technology to connect people and a strategy to drive growth,” Mohammed Al Faisal, chairman of STC Group, had said.

Spain’s acting economy minister Nadia Calvino said that the government was reviewing the deal.

“Telefonica is a strategic company for our country and as government, we will apply all the mechanisms that are necessary to prioritise the defence of our strategic interests,” Calvino was quoted as saying by Reuters.

Olayan Alwetaid, chief executive of STC Group, however, has stated that the company does not intend to acquire control or a majority stake.

Earlier this month, Reuters reported that Spain’s Caixabank CEO Gonzalo Gortazar endorsed STC’s move to build a stake in Telefonica.

“By definition, it has to be good news. We need foreign investment, we have to look at it favourably,” he said.

Caixabank holds a 3.5 percent stake in Telefonica, while Criteria, Caixabank’s holding company, also holds 2.5 percent of the Spanish telco.

Given Telefonica is considered a “defence service provider”, the Spanish defence ministry is involved in acquisitions and holdings between five percent and 10 percent unless the buyer commits not to seek a seat on the board.