LONDON/DUBAI, Sept 5 (Reuters) – Saudi Arabia’s STC Group (7010.SE) has acquired a 9.9% stake in Telefónica (TEF.MC) valued at 2.1 billion euros (2.25 billion dollars), in a bid to become the main shareholder of the Spanish telecommunications giant.
STC, the kingdom’s largest telecom operator, announced the investment on Tuesday after market hours. The holding is made up of 4.9% of Telefónica shares and financial instruments that provide another 5% of the so-called economic exposure to the company.
STC plans to secure voting rights for that 5% stake held through financial instruments after receiving regulatory approvals, the company said.
“We see this as a compelling investment opportunity to use our strong balance sheet while maintaining our dividend policy,” STC CEO Olayan Alwetaid said in a statement, adding that he has no intention of acquiring “control or a majority stake”.
Telefónica said it was informed of the STC investment on Tuesday and described it as “friendly.”
STC built the position with the help of US investment bank Morgan Stanley (MS.N)two sources familiar with the situation told Reuters.
Linklaters acted as legal counsel for the STC and Allen & Overy acted for Morgan Stanley, they added.
Morgan Stanley, Linklaters and Allen & Overy declined to comment.
Telefonica shares were up 2.9% at 0725 GMT in Madrid to 3.86 euros.
Shares of STC were little changed, rising 0.1% to 39.60 riyals ($10.56) at the open of the market in Riyadh.
STC is the largest telecommunications operator in Saudi Arabia and also owns subsidiaries and stakes in companies operating in Kuwait and Bahrain.
It is 64% owned by Saudi Arabia’s Public Investment Fund (PIF), the main driver of Crown Prince Mohammed bin Salman’s Vision 2030 to free the economy from its dependence on oil.
For STC, Telefónica’s investment is its second foray into the European telecoms market, having agreed in April to buy €1.2 billion worth of tower infrastructure from United Group.
Telefónica will present a new strategic plan on November 8 focused on increasing the company’s free cash flow, which according to its CEO could reach 4 billion euros this year.
Telefónica, like its rivals in Europe, has faced reduced profitability due to fierce competition and the need for heavy infrastructure investment for next-generation 5G mobile technology. It has been selling stakes in more mature businesses, such as undersea cables or mobile phone masts, to finance 5G and fiber optics.
Telefónica’s shares closed on Tuesday at 3.75 euros, giving it a market capitalization of around 22,000 million euros. The company was worth more than 110 billion euros when it reached its previous high in 2008.
spanish bank bbva was Telefónica’s first shareholder last year with a 4.9% stake.
($1 = 3.7509 riyals)
Reporting by Andrés González, Amy-Jo Crowley, Pablo Mayo Cerqueiro, and Hadeel Al Sayegh; Additional reporting by Corina Rodríguez; Editing by Elisa Martinuzzi, Jonathan Oatis and Richard Chang
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Andrés González covers mergers and acquisitions for London-based Reuters. With more than 12 years of experience as a correspondent in Spain, he has reported on various sectors, including banking, TMT, energy, infrastructure and real estate. Andrés has also reported on important breaking news such as the Barcelona attacks and various general elections, showing his versatility and ability to handle critical and urgent stories. Andrés’s journalistic career began at Reuters in Spain, where he honed his expertise in financial matters. reports. Seeking new challenges, he ventured into the world of Public Relations, working for Banco Santander with a special focus on the Wealth Management and Investment Banking divisions. His experience in both journalism and public relations has provided him with a comprehensive perspective of the financial industry. Contact: +34636287872
As part of the Reuters deals team, Pablo covers debt and equity capital markets transactions in Europe, the Middle East and Africa, from initial public offerings to acquisition financings. He previously worked at Mergermarket, Euromoney and Spanish digital media. Contact: +447721821589