Saudi Arabia's STC acquires 9.9% stake in Spain's Telefonica

Saudi Telecom Company (STC) announced on Tuesday that it has purchased a 9.9 percent share in Telefonica, a Spanish telecommunications company, for a total of 8.5 billion Saudi rials (equivalent to $2.27 billion).

The collaboration will aid STC – the largest mobile operator in the kingdom – to extend its presence worldwide in important markets.

STC, a company that provides digital products and services in the Middle East and North Africa, stated that they have no plans to obtain a controlling stake in Telefonica.

"Both Telefonica and STC Group possess several commonalities, including a shared objective of utilizing technology to establish connections among individuals, as well as a growth-driven strategy," stated Mohammed Al Faisal, the chairman of STC Group.

STC Group's decision to allocate substantial funds for this venture aligns with our overarching plan for expansion. We aim to make strategic investments in technology and digital infrastructure sectors that show immense potential in various promising markets worldwide.

Telefonica, a telecom conglomerate based in Madrid, is one of the biggest players in the global telecommunications industry. It operates in various countries including Spain, Germany, the United Kingdom, and Brazil.

Telefonica is anticipated to unveil a strategy in November to enhance its available funds, which the corporation indicated could potentially rise to €4 billion ($4.3 billion) by the end of this year.

The most recent investment showcases STC's approach to expanding its business and aligns with the company's goals for growth.

According to investment bank EFG Hermes, the investment will help STC with its capital recycling efforts and growth strategy to expand into lucrative markets and reap the benefits of these investments. This will increase the company's ability to invest in new areas and generate sustainable returns for its shareholders.

The long-term consequences of this investment will be beneficial and will not have any effect on STC's accepted dividend plan.

In the previous month, STC successfully finalized its purchase of the telecommunication tower assets of United Group, based in the Netherlands, for a total of €1.22 billion ($1.33 billion).

During the same month, iot squared, a collaboration between STC and the nation's sovereign wealth fund known as the Public Investment Fund, entered into a legally binding agreement to purchase the entirety of technology firm Machinestalk. Machinestalk is primarily dedicated to the Internet of Things.

According to the Saudi Press Agency, the agreement is expected to enhance the worth of iot squared with Machinestalk's field services skills, technology, exclusive IoT platforms, in-house development abilities, connections with both local and international partners as well as customers, which are all based in Riyadh.

STC's decision to invest in Telefonica demonstrates their trust in the company's "management, its plan, and its aptitude for generating value," stated Olayan Alwetaid, the CEO of STC.

Mr. Alwetaid stated that they have no plans to gain control or majority ownership. Instead, they view this as an attractive investment chance where they can utilize their robust financial position, all while continuing their dividend policy.

According to a document submitted to the SEC, Telefonica acknowledged STC's amicable manner and their endorsement of the executive team, Telefonica's strategic plans, and its proficiency in generating worth.

In the beginning of this year, Saudi Arabia, the largest economy in the Arab region, disclosed investments exceeding $9 billion in its technology industry with the aim of strengthening the kingdom's digital revolution.

In February, Saudi Arabia's Minister of Communications and Information Technology, Abdullah Alswaha, announced that Microsoft has made a significant investment of $2.1 billion to establish a highly efficient cloud infrastructure in the country.

Additionally, Oracle has declared intentions to allocate a substantial amount of $1.5 billion towards augmenting the cloud-computing capabilities of the kingdom. Moreover, China's Huawei has committed a significant investment of $400 million to enhance the cloud infrastructure of Saudi Arabia.

Last updated: September 06, 2023, at 5:57 in the morning.