Saudi Arabia’s largest telecommunications company, STC, has acquired a 9.9% stake in Telefónica, a leading telecoms player in Spain, Germany, the UK and Brazil, along with a number of other Latin American countries through Telefónica Hispanoamérica. The stake is valued at €2.1 billion (about US$2.26 billion).
The UK’s Financial Times newspaper says STC is Saudi Arabia’s largest communications company, with more than 80% of market share. It earned US$17 billion in revenues last year. Telefónica had a market capitalisation of €22billion (US$23.6 billion) before the announcement.
This isn’t quite a done deal yet. STC, which is majority-owned by the Saudi sovereign wealth fund, has acquired 4.9% of Telefónica’s shares. It has said it is using other financial instruments to lift its stake to 9.9% – if it gets approval from regulators.
This is important. Telefónica is not only one of Spain’s biggest companies, but it has businesses related to national security and cyberdefence, so the Spanish government needs to approve this deal – a deal that will make STC Telefónica’s largest shareholder.
As for STC’s ambitions, its Chief Executive, Olayan Alwetaid, said in a press release: “We do not intend to acquire control or a majority stake but rather we see this as a compelling investment opportunity to use our strong balance sheet whilst maintaining our dividend policy.”
STC points out: “Telefónica benefits from a unique portfolio of best-in-class infrastructure assets and cutting-edge technology platforms, where it is developing state-of-the-art capabilities in adjacent areas such as cognitive intelligence, edge computing and Internet of Things.”
Telefónica appears to be supportive of the move. The Financial Times says the Spanish company learned of STC’s move on Tuesday and took note of “STC’s friendly approach and its support [of] the management team [and] Telefónica’s strategy and ability to create value”.