Madrid, Spain – Spain’s government has acquired a three-percent stake in telecoms giant Telefonica following concerns over a Saudi firm taking a piece of a company that Madrid considers strategically important.
Spanish state-owned holding company SEPI said in a filing with the stock market regulator late Monday that the move was “in line with a cabinet decision in December” to acquire 10 percent of Telefonica’s share capital.
At the time, the government of Socialist Prime Minister Pedro Sanchez said it was to safeguard the firm’s “strategic capacities and essential importance” to Spain.
It is the first time that the Spanish government has taken a stake in Telefonica since it was fully privatized in 1997.
In September, Saudi Telecom (STC) said it had paid 2.1 billion euros ($2.3 billion) for a 9.9 percent share in Telefonica, causing concern in Madrid, which only learned of the transaction at the last minute.
Had it been over the 10 percent threshold, the deal would have required government approval.
STC, which is majority-owned by Saudi’s PIF sovereign wealth fund, insisted at the time it did “not intend to acquire control or a majority stake” in Telefonica, which has a strong presence in Latin America and Britain.
Spain’s government said the move to acquire a stake in Telefonica was in line with its European neighbors, which also own small minority stakes in their leading telecoms operators.
The return of the state as one of Telefonica’s shareholders comes as the company is in the process of cutting 3,400 jobs by 2026 in Spain, about one fifth of a total workforce of 16,500, as it tries to boost its profitability.
The company currently has a global workforce of over 100,000 people.
With Telefonica weighed down by a heavy debt load, the sharp jump in interest rates this past year has caused concern about its finances.