Spain decides to block Saudi from taking majority share in Telefonica

By Senhan Bolelli

MADRID (AA) - Spain’s left-wing coalition government decided on Tuesday to prevent Saudi telecommunications company STC Group from taking a majority share in Madrid-based multinational Telefonica, declaring it to be of strategic importance.

With Tuesday’s Cabinet decision, the government also ordered the purchase of 10% of Telefonica by the State Industrial Participation Company (SEPI), also notifying the National Securities Market Commission of its move.

As Telefonica's current capital is €20.5 billion (nearly $22.5 billion), the purchase is expected to be equivalent to €2.05 million.

SEPI stressed that Telefonica is a leading company in the field of telecommunications both in Spain and internationally, adding that the firm is "vital for the economy, productive tissue, research, security, defense, and ultimately the well-being of citizens."

While Telefonica was privatized in 1997 by Spain’s then-right-wing government, with the current acquisition it will return to the Spanish state.

The Saudi STC Group announced in September that it had purchased 9.9% of Telefonica for €2.1 billion.

The Spanish government had opposed the Saudi company becoming Telefonica's largest shareholder, arguing that it is a nationally strategic company.

Economy Minister Nadia Calvino said after the Cabinet meeting that the purchase "enables the state's participation in major strategic telecommunications projects," arguing that this is "compatible" with similar actions of other major European countries such as France and Germany.