The Telefónica shares recorded at the opening of the bag This Wednesday the biggest jump in its price in almost three years. The operator has suffered in recent years a more or less continuous cut in its price from its historical highs, back in 2015 when it reached a price of around 14 euros. Since Pedro Sánchez became president of Spain, the share price has gone from oscillating around 7.5 euros to the current 3.5 euros. basing its attractiveness to investors on its dividend. The Government’s announcement of the purchase of shares for around 2,000 million euros to gain control of at least 10% of the company’s capital and prevent it from falling into the hands of the Saudi State had its impact on the equity market with a revaluation of 7.2% at the opening, which was mitigated to around 4% at midday. At 9:50 a.m. the shares of the telecommunications company rose 4.6%, announcing that the titles were going to be in the center of investment attention throughout the day.
The evolution of Telefónica’s share prices in the future may be affected by the operation. Some analysts have already warned that the company’s general strategy may change due to the influence of public participation, especially in business and the expansion agenda in Latin America.
The reasons for the operation
The objective of the operation carried out through the Spanish Society of Industrial Participations (SEPI) is none other than to return to the State control of a strategic firm in the telecommunications sector sold at the time by the PP Government of José María Aznar and that could fall into Saudi hands. The idea of stability plans in the operation, which officially aims to provide “greater stability to shareholders” and protect the “strategic capabilities” of the former telecommunications monopoly.
“Telefónica is a leading telecommunications company both in Spain and internationally,” SEPI stated this Tuesday, highlighting that the firm “carries out a set of activities of crucial relevance to the economy, research, security, defense and well-being of citizens”.
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The position marks a major change for Spain, which has been more reluctant in recent years than other European nations to intervene in markets and take ownership of large companies. The Spanish government sold its last stake in Telefónica more than 20 years ago, ending decades of public ownership of the company. But the Saudi investment has forced the Spanish Government to reconsider the role of the State in Telefónica and impose the traditional golden share, which regulates the company’s strategic decisions in defense of the interests of Spain. To achieve this decisive influence on the board of directors, the State will also have the shareholder support of CaixaBank and BBVA. Countries like France and Germany own stakes in their former telephone monopolies.
Holdings
From an ideological point of view, the increase in the weight of the State in Telefónica represents a Copernican turn with respect to the policies carried out in the past by the PP. At the time the operation is confirmed, it will be the State’s fourth most relevant investment among its listed investees, behind Aena, Airbus and CaixaBank. But the State has shares or significant shareholding participation in many companies, either due to historical heritage or due to the strategic nature of those companies. The state participation through Enaire in Aena (airport management) is valued at more than 12.5 billion euros (51%). But Sepi also has a stake in Airbus or Hispasat, key players in the aerospace sector. Through Frob, the State is present in 16% of CaixaBank’s capital, and also has a presence in Redeia, the former Red Eléctrica, where Sepi has a 20% stake, or in Indra (28%). Not only does the State have a presence in the financial sector, defense or communications, but also in the agri-food sector (Ebro Foods, 10%), in IAG, Enagás, in Correos, Navantia (ship construction), Tragsa (agrarian-environment sector), Mercasa (wholesale markets), Enusa (nuclear energy), media (EFE, RTVE…9), lotteries, tourism (Paradores), infrastructure or transportation (Renfe, Adif, Puertos del Estado)…