Saudi telecom company STC has acquired a 9.9% stake in Telefonica for €2.1 billion ($2.25 billion), making it the largest shareholder in the Spanish telecom giant. STC, the largest telecom operator in the kingdom, announced the investment on Tuesday after market hours. The stake includes 4.9% of Telefonica's shares and financial instruments that grant it an additional 5%.
STC stated that it intends to acquire voting rights for the additional 5% obtained through financial instruments after receiving regulatory approvals. Aliyan Al-Wateed, CEO of STC, said in a statement, "This deal represents a promising investment opportunity that allows us to optimally leverage our strong financial position while continuing our adopted dividend distribution policy," adding that the company does not intend to acquire a controlling or majority stake.
Telefonica confirmed on Tuesday that it had been notified of STC's investment and described it as "welcome." Telefonica's shares rose by 2.9% at 07:25 GMT in Madrid on Wednesday, reaching €3.86 per share. STC's shares remained relatively stable, with only a 0.1% increase to 39.60 SAR ($10.56) at the opening of trading in Riyadh.
Saudi Telecom Company is the largest telecom operator in the kingdom and holds stakes in companies operating in Kuwait and Bahrain. It is 64% owned by the Saudi sovereign wealth fund, the Public Investment Fund, which is a key driver of Crown Prince Mohammed bin Salman's Vision 2030 to reduce the economy's dependence on oil.
Gulf telecom groups are increasing their investments abroad, as UAE-based e& raised its stake in Vodafone Group to 14% in March. For STC, the investment in Telefonica marks its second entry into the European telecom market after agreeing to acquire tower infrastructure worth €1.2 billion from United Group in April.
