Government Moves to Replace Álvarez-Pallete as Telefónica's President

The Spanish government is preparing to initiate a change in leadership at Telefónica, with plans to remove José María Álvarez-Pallete from his position as president of the telecommunications giant. The State Society of Industrial Participations (SEPI), which holds a 10% stake in Telefónica, is reportedly spearheading efforts within the company's board of directors to facilitate this transition.

According to sources familiar with the matter, the decision to terminate Álvarez-Pallete's presidency is expected to be finalized during an upcoming board meeting scheduled for this weekend, prior to the opening of the stock markets. Marc Murtra, who has been at the helm of Indra since 2021, is anticipated to be the successor.

On Friday, January 17, the primary shareholders of Telefónica communicated to Álvarez-Pallete their intent to proceed with his dismissal. Reports suggest that he will not resist the decision and that his replacement will occur in an orderly manner.

SEPI acquired its 10% stake in Telefónica in May 2024, investing EUR2.284 billion as part of a strategy to respond to the entry of Saudi telecommunications company STC into Telefónica's capital structure. STC had previously acquired a 9.9% stake in the company, comprising both direct shares and financial derivatives, in a deal valued at approximately EUR2.1 billion.

The reasons behind the move to oust Álvarez-Pallete, who has led Telefónica since April 8, 2016, are believed to stem from the poor performance of the company's stock on the market. Despite steady profits and a substantial reduction in debt by 50%, Telefónica's shares have plummeted by 60% since he took office.

At the time of Álvarez-Pallete's appointment, Telefónica's share price stood at EUR9.31. By September 5, 2023, when STC's investment was announced, shares were trading at EUR3.75, closing at EUR3.97 on January 17.

STC, which is backed by Saudi Arabia's Public Investment Fund (PIF) and led by Crown Prince Mohammed bin Salman, has been actively acquiring stakes in various global companies to diversify its economy away from oil dependency. The decline in Telefónica's stock price presented an opportunity for Saudi investors to become the largest shareholders for a relatively modest sum.

Interestingly, the Saudi investment prompted the Spanish government to intervene by acquiring a stake in Telefónica through SEPI, which is viewed as a strategic asset for national interests. Initially, the government's stake was seen as a supportive measure for Álvarez-Pallete, but it has now become the catalyst for his imminent departure.

José María Álvarez-Pallete, born on December 12, 1963, in Madrid, ascended to the presidency of Telefónica following the resignation of his predecessor, César Alierta. By the time he took over, he had already spent 17 years in various leadership roles within the company, beginning his career as the finance director for Telefónica Internacional in 1999. His rise through the ranks included positions as the head of Corporate Finance, president of Telefónica Internacional, and later, Telefónica Latinoamérica. In 2011, he became the CEO of Telefónica Europe before succeeding Julio Linares as CEO.