To preserve its technological sovereignty, the Spanish state returns to the capital of Telefonica

2024-03-27 15:54:00

There is no question of leaving Telefonica in the hands of a foreign power. This is the message sent Monday evening by the Spanish government. That same day, a state holding company, the Public Company of Industrial Participations (SEPI) announced that it had taken a 3% stake in the historic operator. The maneuver is unprecedented: it is quite simply a return of the State to the capital of this telecoms giant since its total privatization in 1997. Madrid does not intend to stop there. The Socialist Prime Minister, Pedro Sanchez, indicated in December that the State intended to take 10% of the operator’s capital.

Why did the executive embark on such an operation? To light a counterfire, and prevent losing control over this judged society “very important and strategic for the country”, in the words of Pedro Sanchez. The government has not hidden its fears after the surprise capital increase, in September at least, of the Saudi Arabian Telecom Company (STC). He paid 2.1 billion euros for a 9.9% stake in Telefonica, but without crossing the 10% threshold which would have required the green light from the authorities.

Telefonica, the Spanish telecoms giant, wants to (further) reduce its workforce

An issue of sovereignty

However, Madrid clearly does not want its telecoms giant to come under foreign control. The challenge, in his eyes, is the preservation of the technological sovereignty of the country’s leading operator, at a time when Internet services permeate all sectors of society. Telefonica, which employs some 100,000 people worldwide, is also an important player in several strategic areas. The operator has, in particular, forged close links with the defense sector.

The executive also wants to have a say on the group’s strategic directions. He is going through a turbulent period to say the least. For years it has suffered from particularly strong competition from the other side of the Pyrenees. The recent merger between its rivals Orange Spain and MasMovil will also give it a hard time by giving birth to a particularly powerful runner-up on the market. Telefonica is today, like other large European operators, heavily indebted, to the tune of 27 billion euros for a turnover of 40 billion euros.

Cost reduction

In this context, Telefonica is chasing costs. The operator, for example, recently decided to cut 3,400 jobs in Spain, or one in five employees.

His staff could go further. It could, like Telecom Italia, decide to sell its valuable fixed Internet network to other players. This hypothesis is often mentioned. But by being in the capital, Madrid would then, if it wishes, have the means to oppose it.