Saudi Telecom announced on Tuesday that it has acquired a nearly 10% stake in Spain's Telefonica (NYSE:TEF), representing about 569.3 million shares, for approximately $2.25 billion (2.1 billion euros). The transaction was financed through a combination of the company's own resources and bank debt. This move aligns with Saudi Telecom's strategy to expand by acquiring stakes in valuable strategic assets in promising markets.
The acquisition is likely to draw attention from the Spanish government as Telefonica is considered a company of strategic importance, operating infrastructure that is critical to the nation's defenses. Stake acquisitions of more than 5% may require approval from the country's cabinet. Prior to this acquisition, two Spanish banks, CaixaBank SA (OTC:CAIXY) and Banco Bilbao (NYSE:BBVA) Vizcaya Argentaria SA, were the anchor investors in Telefonica, owning less than 10% of the company.
In a statement, Saudi Telecom clarified that it does not plan to gain control or take on a majority stake in Telefonica. "We see this as a compelling investment opportunity to use our strong balance sheet whilst maintaining our dividend policy," the company said.
The stake acquisition comes at a time when Telefonica's executive chairman, Jose Maria Alvarez-Pallete, is preparing to present a new vision and strategy for his company at a November meeting. Despite struggles with attracting investors and growing profits in Spain, Telefonica's largest market, the company has seen its efforts to improve profits begin to pay off. In July, Telefonica forecasted revenue growth ahead of analysts’ estimates for this year.
Saudi Telecom is 64% owned by the Saudi sovereign wealth fund and is the largest telecom firm in the Middle East. The company has been seeking to diversify its operations over the past few years through various strategies such as creating a new tower operations unit, spinning off its data center and internet services businesses, and building out a digital bank, STC Pay.
Telefonica operates in several markets including the U.K., Germany and major Latin American countries. The company has been shifting towards expanding technology services for clients as well as investments in telecom infrastructure. Earlier this year, Telefonica and Saudi Telecom signed a partnership to explore joint business opportunities in areas including cybersecurity and cloud services.
On Wednesday, Telefonica was up 1.7% at $4.17 on the news at 3:31 p.m. in New York.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.