Saudi Telecom Secures 9.97% Stake in Telefónica, Seeks Board Representation

Saudi Telecom Company (STC) has announced to the U.S. Securities and Exchange Commission (SEC) that it now owns a 9.97% stake in Telefónica, a position authorized by the Spanish government. This acquisition comes shortly after a leadership change at Telefónica, now led by Marc Murtra. STC's move makes it the second-largest shareholder in Telefónica, just behind the state-owned Sociedad Estatal de Participaciones Industriales (SEPI).

In its communication to the SEC, STC indicated plans to initiate discussions with Telefónica regarding a seat on its board of directors. This announcement marks the first formal declaration of such intent following the acquisition of shares under a contingent agreement. The Saudi telecom group aims to establish a dialogue with Telefónica about board representation, which was initially suggested when the investment was authorized.

While STC has stated it will act as a passive investor for the time being, it reserves the option to take a more active role in the future. The company has clarified that, although it currently has no plans to increase its stake, it may engage with Telefónica's management regarding potential business combinations, strategic alternatives, and corporate governance matters.

According to the SEC filing, STC has acquired the Telefónica shares for investment purposes. The company intends to continuously evaluate this investment and may consider various actions, including purchasing additional shares or selling some of its holdings, depending on market conditions.

The details surrounding the SEC filing are somewhat complex. The document states that STC now holds a 9.97% ownership, with a significant event triggering the reporting obligation occurring on January 17, suggesting that the acquisition was finalized then. However, there are notes indicating that the investment vehicle, Green Bridge Investment Company, had previously acquired 281,772,449 shares and signed an agreement for an additional 283,508,077 shares, implying that the transaction may not have been fully completed at the time of reporting.

STC's filing clarifies that Green Bridge, which is wholly owned by STC, holds these shares. As the parent company, STC effectively controls all voting rights associated with the shares owned by Green Bridge.

Furthermore, the completion of the acquisition of the remaining shares is contingent on receiving all necessary approvals related to foreign direct investment and potential merger control regulations. The Spanish government had previously authorized the acquisition of up to 9.97% in November, with STC agreeing to specific measures to safeguard Spain's national security interests, as highlighted by the Minister of Economy, Carlos Cuerpo.

In summary, while STC is initially taking a passive approach as an investor, it is laying the groundwork for potential future involvement in Telefónica's strategic direction.