Shares of the Spanish telecommunications giant Telefónica SA (ES:TEF) surged today after Spain announced its decision to acquire around a 10% stake in the company. The Spanish government announced this move in response to the purchase of a 9.9% stake in the company by Saudi Arabia-based STC Group. The stock gained around 3.5% at the time of writing today.
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During the early trading hours, Telefónica shares were up by over 5%, placing them among the top gainers on the STOXX 600 index.
Based in Spain, Telefónica is a leading telecommunications company providing an extensive range of services, including voice, data, television, and Internet access to individual consumers and businesses.
The Backdrop
STC, majority-owned by Riyadh’s sovereign wealth fund, has set its sights on Telefónica as part of the Saudi group’s broader strategy to increase investments in Europe. In September, STC announced the purchase of a total 9.9% stake in Telefónica, positioning it as the company’s top shareholder. The transaction includes 4.9% of Telefónica’s shares and additional financial instruments representing another 5% stake. STC intends to obtain voting rights for the 5% interest held through financial instruments, subject to regulatory approvals.
STC has clarified that it has no plans to gain control or a majority stake in Telefónica.
Protecting the Nation’s Critical Assets
The Spanish government’s move to buy a 10% stake in Telefónica is aimed at protecting one of the nation’s most critical assets and providing “shareholder stability.” The government is acquiring this stake through its holding company SEPI (Sociedad Estatal de Participaciones Industriales). The stake is currently valued at €2.1 billion.
SEPI stated that it intends to finalize the acquisition of shares without creating much impact on the share price.
During the Capital Markets Day held in early November, Telefónica confirmed its commitment to implementing the recently approved 2023–2026 Strategic Plan. The main objectives under the plan include delivering an annual revenue growth of 1% and an EBITDA growth of 2% from 2023 to 2026. The company is targeting a dividend of at least €0.30 per share throughout this period.
Is Telefónica a Good Investment?
On TipRanks, TEF stock has a Hold consensus rating backed by six recommendations, including one Buy, three Holds, and two Sells. The Telefónica share price target is €3.80, which is 2.6% higher than the current share price.
