STC Group makes $2.25 investment in Telefonica

Saudi Arabia's STC Group has emerged as the leading shareholder of Spanish telecom giant Telefonica, holding a 9.9% stake. This investment worth 2.1B euros ($2.25B), is part of STC's strategy for expansion and was announced on Tuesday.

• STC’s holding includes a 4.9% share in Telefonica's stocks and financial tools providing an additional 5% economic exposure.

• The company plans to gain voting rights for the 5% interest held via financial instruments upon regulatory clearance.

• This investment aligns with STC's strategy to utilize its strong balance sheet while maintaining its dividend policy, as confirmed by STC CEO Olayan Alwetaid.

• Alwetaid asserted that STC does not have plans for acquiring control or a majority stake in Telefonica.

• U.S. investment bank Morgan Stanley assisted STC with this strategic move, with Linklaters and Allen & Overy acting as legal advisors.

• STC is 64% owned by Saudi Arabia's Public Investment Fund (PIF), which is a crucial part of Crown Prince Mohammed bin Salman's Vision 2030 to diversify the economy from oil.

• This investment in Telefonica marks the second venture of STC in Europe's telecom market after its recent purchase of tower infrastructure from United Group.

Telefonica is expected to reveal a new strategic plan on November 8 to enhance the company's free cash flow. Amidst the intense competition and the need for significant investment in the 5G infrastructure, Telefonica has been off-loading stakes in mature businesses to fund 5G and optic fibre.