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Telefónica’s board has ousted its long-time chair José María Álvarez-Pallete in a surprise move following the acquisition of Saudi Arabia’s STC as a stake in the Spanish telecoms group.
Telefónica announced on Saturday that it had fired Álvarez-Pallete and replaced him with security chief Marc Murtra “due to the new structure of the shareholding” and the desire of some shareholders for a “new step” of leadership.
The Spanish government had a decisive role in the move, which came after another investor move that began with the announcement by telecoms group STC that it would acquire 9.9 percent of Telefónica by 2023.
STC is owned by the largest private wealth fund in Saudi Arabia and the operation surprised Spain as the first investment in one of the largest companies in the Gulf state.
In response, the Spanish state increased its share in Telefónica to 10 percent as a pregnancy.
Álvarez-Pallete was called to a meeting at the offices of Prime Minister Pedro Sánchez on Friday to be told he would be fired, according to one person familiar with the situation.
Telefónica’s board met to approve the decision on Saturday afternoon. It chose to pull Murtra from another state-owned company – Indra, a defense group known for radar systems, where he was chairman.
STC said it wanted to partner with Telefónica, touting the Spanish group’s “core core assets” and advanced technology in areas such as artificial intelligence and the internet of things.
STC’s investment in Telefónica marks a strong return for the company to invest abroad after a period of retreat since it acquired telecom stakes in India, Indonesia and Malaysia more than 15 years ago. The company exited most of these investments but retained a stake in Malaysia’s Maxis.
However, as the Saudi sovereign wealth fund PIF has sought rapid growth as part of the government’s plan to diversify its economy in recent years, STC has begun looking for opportunities to expand beyond its core market in the Gulf region where they operate mobile phones in Kuwait and Bahrain. in addition to Saudi Arabia. Tawal, a subsidiary of STC, acquired tower blocks worth €1.22bn from United Group in 2023 for properties in Bulgaria, Croatia and Slovenia.
Telefónica, with a market capitalization of €22bn, is considered a strategic company because it is involved in national security and cyber security, but it is also seen by other investors as an organized timber organization.
During Álvarez-Pallete’s nine-year tenure, Telefónica’s shares fell by nearly 50 percent at a time when the European telecoms sector was struggling. Last year it lost its position as the largest telephone provider by number of customers in Spain when Orange and MásMóvil merged.
The ousted chairman, who worked at Telefónica for 26 years and led the company since 2016, had gone to Saudi Arabia at least once to discuss the future of Telefónica with STC management.
STC does not have a seat on Telefónica’s 15-member board but is expected to seek to fill the current vacancy with one of its nominees.
In September 2023, the Saudi group revealed that it had acquired a 4.9 percent stake in Telefónica and bought derivatives that gave it access to 5 percent of the company’s shares. It requested the Spanish government’s approval to increase its stake to 9.9 percent in derivatives and it was granted in November.
After its move, Sepi, a company that deals with the country of Spain, acquired a 10 percent stake in Telefónica. The investment arm of the Caixa Foundation, close to the government and linked to lender CaixaBank, has also raised its stake to 10 percent. Long-term shareholder BBVA, another bank, has 5 percent of Telefónica.
In addition to being fired, the company said Álvarez-Pallete agreed to the board’s request that he resign as director. The board said it unanimously expressed its “deepest gratitude” to him “for the many services he has rendered and his extraordinary effort, dedication and contribution during his long career at the club”.
