SEPI Proposes Marc Murtra as Successor to Pallete at Telefónica
The Sociedad Estatal de Participaciones Industriales (SEPI), the main shareholder of Telefónica and a state-owned entity, is set to propose Marc Murtra, the current president of Indra, as the new head of Telefónica, according to sources familiar with the matter. Murtra has been leading Indra, a technology and defense company also controlled by SEPI, for the past four years.
Telefónica's shareholders have decided to convene an extraordinary board meeting, which is expected to take place either later today or tomorrow, to discuss the potential transition from José María Álvarez-Pallete, who has served as the company's president since April 2016. This proposal, backed by SEPI, would mark the end of Álvarez-Pallete's lengthy tenure at the telecommunications giant.
SEPI, which holds a 10% stake in Telefónica, has been considering this leadership change for several months. With Álvarez-Pallete's mandate set to expire at the upcoming shareholders' meeting in April, SEPI is faced with the decision of either extending his term or introducing new leadership to rejuvenate the telecom firm.
This leadership shift comes amid significant changes in Telefónica's ownership structure over the past year, including the entry of the Saudi Telecom Company (STC) and increased stakes from SEPI and Criteria Caixa. The anticipated leadership change will coincide with a comprehensive overhaul of the board of directors to align with the new shareholder dynamics, enjoying the support of both the government and key stakeholders.
SEPI completed its acquisition of a 10% stake in Telefónica last May, investing EUR2.384 billion, making it the largest shareholder of the Spanish multinational. Other significant shareholders include STC with 9.97%, Criteria Caixa with 9.9%, BBVA with 4.83%, and BlackRock with 4.23%.
Murtra's nomination has reportedly gained the support of major Telefónica shareholders who have representation on the board, as well as a sufficient number of independent directors. Although Murtra does not meet the requirement of being a board member for at least three years prior to his appointment, a provision in the company's statutes allows for exceptions if at least 85% of board members vote in favor.
Murtra's potential appointment follows a challenging period at Indra, where he has faced obstacles in executing his strategic plan. Indra is currently navigating the sale of certain technological service divisions while aiming to acquire Hispasat to strengthen its industrial defense capabilities, particularly as European nations commit to increasing military spending alongside NATO.
Murtra's departure from Indra would create a significant vacancy, prompting an immediate process to select a new president, as outlined by the corporate governance code. José Vicente de los Mozos, the current CEO of Indra, is expected to take over leadership until a new president is officially appointed.
The upheaval in Telefónica's shareholder structure began in September 2023 when STC unexpectedly acquired a 9.97% stake, prompting concerns among the government and other major stakeholders due to the strategic nature of the company. In response, SEPI moved to secure its position by acquiring a substantial stake in the telecom firm.
In recent months, Criteria Caixa increased its stake in Telefónica from 4.91% to 9.9%, investing EUR1.1 billion. Moreover, on November 28, the Spanish cabinet authorized STC to convert a previously held 5% stake into equity, solidifying its position among the top shareholders.
As Telefónica navigates this period of transition, the company faces significant challenges under Álvarez-Pallete's leadership. Since his appointment in April 2016, the company's stock has seen a dramatic decline from EUR9.31 to EUR3.97 per share, a drop of approximately 57%. While he has implemented a generous dividend policy and share buyback strategy, shareholder satisfaction remains elusive.
Álvarez-Pallete has sought to pivot the company's focus towards profitability and debt reduction, concentrating efforts on key markets including Spain, Brazil, Germany, and the UK. However, the telecom sector as a whole has been grappling with falling revenues, exacerbated by competition from new entrants and the rise of technology firms like Google and Facebook.
Despite attempts to divest unprofitable assets in Latin America, including in Venezuela and Colombia, progress has been limited. The upcoming changes in leadership at Telefónica signal a critical juncture for the company as it strives to adapt to the evolving telecommunications landscape.
