The Saudi Telecom Company (STC) has bought a 9.9% stake in Telefónica for €2.1 billion, becoming the largest shareholder in the Spanish telecommunications company. Until now, Spanish bank BBVA was Telefónica's largest shareholder, with 4.87%, followed by US fund BlackRock, with 4.48%.
In detail, the Saudi government-controlled telecom operator purchased about 569.3 million shares and is using financial instruments that will altogether hand it a 9.9% interest in Telefónica once approved by regulators, according to a filing posted late Tuesday. The transaction was funded with a combination of the company’s own resources and bank debt.
Telefónica was informed of STC's investment on Tuesday, describing it as "friendly." The company has already informed the National Securities Market Commission in Spain of the transaction. Telefonica shares rose 3% to €3.87 in Madrid trading on Wednesday, making the carrier the best performer on the Stoxx 600 Index at that point. STC’s shares were broadly unchanged.
The Saudi Telecom Company said the investment reflects its confidence in Telefónica's management, strategy, and ability to create value. “We see this as a compelling investment opportunity to use our strong balance sheet whilst maintaining our dividend policy," said in a statement Olayan Alwetaid, CEO of Saudi Telecom Company, adding that the group does not intend to acquire control or a majority stake in the future.