The Council of Ministers will have the capacity to decide on the entry of the Saudi telecommunications giant Saudi Telecom into the capital of Telefónica through the purchase of 9.9% that will make it the first shareholder.
Sources from the Saudi company explain that at the beginning of this year Telefónica was registered on the list of strategic suppliers of the Ministry of Defense for the provision of services through specific subsidiaries in especially sensitive areas of national security.
Pursuant to the rules for appearing on this list, no investor can take more than 5% of a strategic supplier without a permit from the Ministry of Defense granted through the Council of Ministers. Yes, there is an exception that allows the participation to be raised from 5% to 9.9%, but without exercising political rights over that part in the event that the Government prevents it.
This is the situation of Saudi Telecom, which has directly bought 5% of Telefónica and which can exercise political rights over this portion, but must obtain a permit from the Government for these rights to be extended to 9.9%. Pending authorization, which may take about three months but for which the investor does not want to give deadlines, Saudi Telecom has parked 4.9% of Telefónica through derivatives, that is, future purchase rights with an option to renewal.
These Defense Sector Authorization Rules (DSAR) are the only regulatory obstacle in Spain – in Brazil a permit is also necessary – for the Saudi group. The anti-takeover shield created by the Government during the pandemic and extended until 2024 to prevent the purchase of strategic companies allows the Council of Ministers to veto the entry of a non-EU investor in a Spanish listed company, but only when it takes a stake greater than 10%, and It is not the case.
Sources indicate that Saudi Telecom has been a partner of Telefónica for some time through different programs and that it had maintained previous contacts with its leadership. He has not done so with the Government and the opposition, with whom he will now establish relations, among other things due to the leak risks of an operation of this nature.
By purchasing 9.9% for 2.1 billion euros, the Saudi group has become the main shareholder of the Spanish telecommunications group, ahead of the 4.8% held separately by CaixaBank, BBVA and BlackRock.
The investment is long-term and the company says it will support both Telefónica’s current strategy and its management team, led by José María Álvarez-Pallete. “There is no intention to acquire control or majority interest”; The new investor stands out, who sees potential in the international implementation of Telefónica, with a strong presence in countries such as Germany, the United Kingdom or Brazil.
From Brussels, the acting first vice president, Nadia Calviño, has indicated that the government received the information yesterday and pointed out “the friendly nature of the operation”. The government right now is “analyzing all relevant issues, having a very clear objective: to protect the interests and strategic sectors of our country,” she added.
Telefónica’s shares have started today’s session, the first since the Saudi investor’s irruption was known yesterday, at a price of 3.75 euros, similar to yesterday’s closing. Its stock market value stands at 22,170 million euros, 9% more than at the beginning of the year.
