Telefónica’s long-awaited board meeting this Wednesday, the first after the announcement of the capital injection of the operator Saudi Telecom Company (STC), was quieter than expected. The president of the Spanish multinational, José María Álvarez-Pallete, has assured the main shareholders (La Caixa, BBVA and the Blackrock fund) of the “friendly” intentions of the Saudi group, telling them that it will not interfere with the company’s management , according to sources familiar with the meeting.
STC intends to obtain the approval of the Spanish Government to give effect to the purchase of 5% of the capital parked in financial instruments and, together with the 4.9% that it already officially holds, to consolidate its position as the largest shareholder of the company . Spanish operator. Only once it has this official permission will the Saudi company ask for a position on the board, although it has reiterated its support for the current management team, according to sources consulted by this newspaper.
Looking at the board meeting, Telefónica’s president had first-hand information, having held at least two meetings with STC leadership. He traveled to Riyadh on the 7th with CEO Ángel Vila, two days after the Saudi group announced its entry into the capital of the Spanish company. And last week, on the 18th, he met again with STC CEO Olayan Alwetaid at a meeting of the GSMA, the global organization of telecommunications operators, of which Pallete currently holds the presidency.
However, the accession of the STC was not the main topic of this council meeting, which was orderly since it was called in advance, like the last Wednesday of every month. However, on this occasion the Saudi operation attracted the attention of the directors, especially the independent ones, since the company’s own directors (BBVA and La Caixa) were aware of it. Pallete has already held talks with Carlos Torres, president of BBVA, and Isidro Fainé, president of Criteria Caixa and vice president and board member of Telefónica, to explain the Saudi move, which he learned about on the same day he officially learned about it. officially found out. La Caixa and its investment arm Criteria own 5.98% of Telefónica’s capital. Blackrock has 4.98% and BBVA has 4.87%.
The attitude of the board and managers of Telefónica is to “wait and see” because they understand that the ball is now in the court of the government, which, according to the sources mentioned above, must decide on the entry of STC, even though it is the Saudi group has still not formalized this request to the Council of Ministers, as Nadia Calviño, First Vice President and Minister of Economy and Transformation, admitted this week.
The government has the power to block STC’s acquisition of 9.9% of Telefónica, 64% owned by the Saudi state through the FIP sovereign wealth fund, on national security grounds, since the Spanish multinational is a strategic company with contracts with the Ministry of Defense is in telecommunications and cybersecurity. It can even apply a rule from 2003 (Article 7 of Law 19/2003) that would allow it to suspend Saudi access to the Telefónica capital almost at will and without limit. However, everything indicates that the executive will approve the operation, but will subject it to a series of conditions similar to those that applied in 2021 to the purchase of 23% of Naturgy Energy Group by the Australian fund IFM Global Infrastructure, says EL PAÍS.
These conditions include supporting certain company policies, such as investing in important projects for the country; maintaining headquarters and employment in Spain; a prudent dividend payment policy and an investment grade leverage ratio. In addition, the buyer would be obliged not to support possible sales of critical assets or to support a bid to privatize the company.
The executive is aware that a frontal veto of the operation would send a very negative message to foreign investors such as Saudi Arabia’s Public Investment Fund (FIP). The ability to mobilize this type of fund depending on state capital was demonstrated this week at the annual meeting of the International Forum for Sovereign Wealth Funds (IFSW) in Madrid, which was attended by more than 200 representatives of 45 institutional sovereign wealth funds. Investors, companies and Spanish politician.
Action movements and accident plan
Given STC’s entry into Telefónica’s capital, the operator’s main shareholders are positioning themselves on the market by purchasing securities. Criteria Caixa has acquired more than 750,000 shares in recent months, with a total investment of 3.1 million euros and prices ranging from 3.73 euros at the beginning of the month to just over four euros in recent transactions. as reported to the National Securities Market Commission (CNMV). On the contrary: the American fund Blackrock, which has no representative on the board, recently increased its short position in Telefónica from 0.5% to 0.6%. The North American investment fund is thus betting on a drop in the price of the Spanish operator, which closed above four euros on May 19th for the first time since May 10th.
Telefónica shares ended the day this Wednesday at 3.865 euros, down 1.7%, although with a revaluation of 12.3% so far this year and 3% compared to 3.75 euros on the 5th, as STC appeared in the company made public.
Precisely revaluing the stock to reward the trust of shareholders is the first objective set by Álvarez Pallete in the new strategic plan for 2023-2026, which he presented on November 8 at the company’s first investor day in 12 years will introduce. When Pallete became president of Telefónica on April 8, 2016, the stock was trading at 9.31 euros, more than double the current price and a far cry from the 20 euros it reached in 2007.
STC’s entry comes in a very turbulent telecommunications scenario in Spain, characterized by low-cost competition from companies like Digi, which are driving up prices and stealing customers and revenue from large operators. To mitigate the effects of this earthquake, Orange and MásMóvil have decided to merge and are awaiting approval from Brussels. For its part, Vodafone is negotiating the sale of its Spanish subsidiary to the British fund Zegona. And Telefónica, which is unable to cope with this type of corporate business due to its nature as an incumbent operator, must convince new investors such as the Saudi group to support its investments or cut costs. Including workers, as the company is preparing a new voluntary sick leave plan (PSI) after applying it between 2021 and 2022, affecting 2,300 workers, at a cost of more than 1,300 million euros, according to the union.
Follow all information Business And Business on Facebook and Xor in our weekly newsletter
The five-day agenda
The most important business quotes of the day, with the keys and context to understand their significance.
RECEIVE IT IN YOUR EMAIL
Subscribe to continue reading
Read without limits