The emergence as the first shareholder of Telefónica of Saudi Telecom (STC), the operator controlled by the Saudi State, caught the Spanish company and also the Spanish Government by surprise. Moncloa acknowledges that she was warned by Saudi Arabia of the operation on Tuesday afternoon, just a few hours before the acquisition of 9.9% of Telefónica by the Arab telecom company for 2.1 billion was made public.
Behind the shock initial and that unexpected call, the Spanish government does not plan to have any direct contact with Saudi Arabia nor with its state telecommunications operator to address the operation. It is neither planned now nor intended to be requested, as confirmed by official sources, who predict that the next contact with STC will occur when it activates the legal process to obtain the necessary approval from the Executive for the transaction.
The acting President of the Government, Pedro Sánchez, will coincide this weekend at the G20 summit with a high-level representation from Saudi Arabia (predictably led by Crown Prince Mahamed bin Salman). But no meeting is scheduled to be held between the delegations of both countries and Moncloa rules out requesting it to include it in the president’s agenda of bilateral meetings, government sources confirm.
State Operation
It is a state operation (the entry of a group controlled by a foreign government into the capital of a strategic company for Spain) and that requires the authorization of the Executive (the anti-takeover shield requires permission if it exceeds 5% in a company linked to defense and national security), but at the moment there are no contacts between both countries. The Minister of Foreign Affairs himself, Jose Manuel Albareshas confirmed that no bilateral meeting between the two countries is planned to address the operation.
The Government indicates that it is monitoring the situation through a “permanent contact” with the management of Telefónica to analyze the situation, and are entrusted to the meetings that the president of the operator, José María Álvarez-Pallete, and its CEO, Ángel Vila, are holding with the Saudi authorities and with the leadership of STC after having urgently moved to the Arab country.
The acquisition of the entire 9.9% shareholding of Telefónica that the Saudi group intends can only be completed with the express authorization of the Spanish Governmentl, under the protection shield for strategic Spanish companies against foreign investors. At the moment, the Saudi company could only exercise voting rights in the Spanish group for a maximum of 4.9%, but to assert the entire 9.9% that it intends to control it needs the approval of the Executive.
STC prepares the petition
Sources close to STC assure that their lawyers are still working and that will be presented in the coming days the request for official authorization from the Government to reach 9.9% of political rights. He ‘anti-opas shield’ raised by the Government during the pandemic to protect companies in strategic sectors from unwanted takeover operations by foreign investors, it generally requires government approval for purchases of packages greater than 10%. But in the case of companies linked to the defense sector, such as Telefónica for its contracts with the Armed Forces, the threshold is lowered to 5% after the latest reform of the shield that came into force on September 1.
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Saudi Telecom has acquired a direct participation of 4.9% of the shares of the Spanish company and another 5% indirectly through financial instruments. The Saudi group will only be able to exercise the voting rights corresponding to that direct 4.9% participation until the government’s ‘ok’, but will have to wait to receive regulatory permissions obligatory to obtain the voting rights for the other additional 5% until the operation is completed.
The Arab company must apply for permission to exceed 5% at Ministry of Defence, although the operation is also detailed by the Ministry of Economic Affairs and must in any case receive final approval after being submitted to the Council of Ministers. In principle, the Executive must rule within a maximum period of three months from the company’s request, but may extend the deadlines as long as necessary if it requests additional information from the purchasing group.