While some European countries already hold minority stakes in national operators, this move is a clear attempt to moderate the influence of foreign actors in key industries
The Government takes a 3% stake in the former incumbent, with an additional 2% holding currently unconfirmed
On 25 March 2024, the Spanish Government – via state-owned industrial holding company Sociedad Estatal de Participaciones Industriales (SEPI) – purchased 175m shares in Telefónica. The position is equivalent to a 3% stake in the firm and is worth close to €700m (£598.5m). There are also reports that a further 2% in financial derivatives has already been acquired, although this has not received official confirmation. According to SEPI, its presence as a long-term shareholder will provide Telefónica with “greater shareholder stability to achieve its objectives, contributing to the safeguarding of the strategic capabilities of a company that is strategic for [Spain’s] national interests due to its leadership in the communications sector.” The partial renationalisation is in line with an agreement reached by the Council of Ministers in December 2023, which orders SEPI to purchase up to a maximum 10% of the company's share capital.
Spain shows it is prepared to defend its strategic interests
The investment represents the first time that the Spanish Government has purchased a stake in Telefónica since it was fully privatised in 1997. However, with the telecoms sector considered vital to security and defence, the country’s policymakers have been eager to shore up national interests and counter a recent (and controversial) investment by Saudi Arabia’s STC. In September 2023, STC purchased a 9.9% interest in Telefónica for €2.1bn (£1.8bn) – something that the Government reportedly did not have prior knowledge about. STC acquired 4.9% in shares and a further 5% in “financial instruments”, making it Telefónica’s largest shareholder at the time. STC has stated that it plans to convert those instruments into shares (which would boost its voting power) but doing so means securing regulatory approval. Government authorisation is required for any foreign investor taking a stake of 5% or more in certain “strategic” companies, with Telefónica’s involvement in sensitive national and cybersecurity matters placing it firmly in that camp.
Other European countries hold small stakes in their national operator, while some operators have taken to investing in their peers
STC – which is majority-owned by Saudi Arabia’s PIF sovereign wealth fund – has stated that it does not intend to seek control over or amass a majority stake in Telefónica. This follows similar statements from Altice and e& regarding the prospect of further investments in BT and Vodafone, respectively. Meanwhile, the Spanish Government has said that buying into Telefónica is reflective of some of its European counterparts (e.g. France, Germany, Italy), which show there are precedents for the state owning minority stakes in their national telecoms operators. Over recent years, several operators have – either directly or indirectly – also moved to acquire shares in their peers. From analysing transaction announcements, we identified four primary motivations for those investments: supporting an existing growth strategy; international expansion; target business transformation; and capitalising on an undervalued opportunity.
