Saudi Arabia acquired almost 10% of Telefónica’s shares: what is the future of the flagship Spanish telco?

Marina Vanni

Saudi Arabia’s Public Investment Fund (PIF) announced on September 5 that it had bought a 9.9% stake in Telefónica, making it its largest shareholder.

The news sparked controversy in some political and business sectors in Spain. The People’s Party (PP) has asked the government to "review" the purchase, and the Spanish Confederation of Business Organizations (CEOE) has warned that the operation could "compromise" Spain’s security. Part of the concerns arise from the sensitive data and critical infrastructure handled by Telefónica in the country.

The Spanish Prime Minister, Pedro Sánchez, has said that the government will closely monitor this acquisition of shares by the Saudi fund and will act in the event that risks to national security are detected. Foreign Minister José Manuel Albares has said that the operation is a "show of confidence" in Spain, but that its possible implications will be studied.

The Saudi Arabian sovereign wealth fund has stated that it is a purely financial investment. The PIF has said that it is interested in acquiring shares in leading companies in the telecommunications sector, and that Telefónica is an attractive company because of its track record of growth and profitability.

Telefónica is one of the largest companies in Spain. According to the Ibex 35 companies list, the firm ranks fifth, with a market capitalization of 27 billion euros. It stands behind Iberdrola, Inditex, Banco Santander and Cellnex. The telecommunications operator is present in more than 50 countries and has more than 360 million customers.

In addition to Saudi Arabia, Telefónica’s other shareholders are:

- BlackRock, with 4.48% of the capital
- BBVA, with 4.87%
- CaixaBank, with 3.5%
- The Vanguard Group, with 2.8%
- Norges Bank Investment Management, with 2.7%
- Fidelity Investments, with 2.6%
- State Street Global Advisors with 2.5%
- Amundi, with 2.4%

These entities represent 54.1% of Telefónica’s shares. The remainder is held by small, institutional and individual shareholders.

The company is currently working on a number of key projects for communications in Spain, Europe and the world, including:

- Development of 5G networks in several countries, including Spain, Germany, the United States, and Brazil. The company aims to have 5G coverage in 90% of its network in Spain by 2025
- Innovation in Internet of Things (IoT) services, including a fleet management system, a security platform, and an asset monitoring solution
- Expansion into new markets, including Brazil, Mexico and Chile
- Development of new businesses such as cybersecurity, artificial intelligence (AI) and big data

Author: Marina Vanni