Morgan Stanley| On Tuesday, the Spanish government decided to order state-owned SEPI to buy up to 10% of Telefónica (TEF), ending a 26-year period of no government control of Telefónica since its privatisation in 1997. However, Nawar Cristin points out that, after this purchase, Telefónica joins a long list of state-controlled companies and that 10% is at the lower end of the range. Moreover, the announcement has not come as a surprise, as SEPI said in October that it was considering buying a stake in Telefónica, although this 10% stake is higher than the 5% previously reported.
This move comes in response to STC’s announcement in September of its acquisition of a 9.9% stake in Telefónica, through 4.9% of the share capital plus 5% of the financial instruments (pending approval). Thereafter, SEPI has announced that it will buy the shares in a way that minimises the impact on the market price, without providing a time frame. Reuters claims that SEPI will buy back shares gradually over a period of two months.
On the other hand, it is worth noting that STC has not yet submitted the application for approval for the additional 5% in the form of derivatives, and therefore the approval process has not started, but in case they do and it is approved, STC would become, together with the government, one of the two majority shareholders, followed by BBVA, Blackrock, CaixaBank, all of them with stakes below 5%.
