Spanish telecommunications are bracing for a sequence of shocks that could reshape the market. The anticipated Orange and MásMóvil merger, the potential sale of Vodafone Spain, and strategic shifts among independent fiber operators all stand to influence the sector’s trajectory. Yet the industry faces an unexpected catalyst triggered by a Saudi petrodollar move that could redefine the playing field.
The Saudi State-controlled operator Saudi Telecom Company has made a sudden move that bypasses traditional, diluted stock packages. This action positions STC as a new shareholder in Spain with a 9.9% stake, worth about 2.1 billion euros. That puts it well ahead of current top investors like BBVA at 4.87%, BlackRock at 4.48%, and Caixabank at 3.5%.
According to Telefónica, the group was unaware of the Saudi entry until recently. STC directly purchased 4.9% of the company’s shares and obtained an additional 5% through financial derivatives, making the deal valued at 2.1 billion euros at current market prices. STC is listed on the Saudi stock exchange, with a market capitalization around 49.2 billion euros, more than twice Telefónica’s value.
The need for the full government backing
The completion of the operation hinges on explicit government approval. An emergency safeguard introduced during the pandemic to shield strategic sectors from hostile takeovers can require state consent for bundles above a 10% threshold. In this case, the threshold has been adjusted to 5% for defense-related companies like Telefónica.
At present, STC will hold voting rights corresponding to 4.9% direct ownership but must secure the necessary regulatory clearances to move beyond the initial stake and exercise control over the remaining financial instruments related to the shares it claims to influence. It would need to reach 5% to secure broader rights over the equity interests involved.
STC, 64 percent controlled by the Saudi sovereign wealth fund, has stated that it does not aim to seize control or a majority position in the Spanish group. Its investment is framed as support for the current management team led by Jose Maria Alvarez-Pallete, with plans to boost profitability and create long-term value for shareholders. A new strategic plan is expected to be presented with a horizon through 2026.
Another jolt for the industry
Spain’s telecommunications sector was already preparing for major institutional moves that could alter the landscape. The market awaits the timing and method of the Orange Spain and MásMóvil merger, a deal the European Commission has paused to allow deeper scrutiny that could affect competition. The consolidation would bring together the second and fourth largest operators in Spain, intensifying regulatory review.
The wider strategic implications will depend on how Brussels addresses competition concerns. Remedies may require asset divestitures to gain approval, and the severity of these conditions will influence further corporate moves across the sector.
Vodafone has initiated a strategic review of its Spain operations, potentially selling its local subsidiary in whole or part as revenues have struggled under rising price pressure and aggressive competition. The final terms set by Brussels for the Orange-MásMóvil union will significantly shape Vodafone Group’s response and its future strategy in this market.
New entrants such as Digi and Avatel are expected to press ahead with aggressive expansion, particularly through fiber and mobile networks. The European Commission’s divestment requirements tied to the merged operator will affect both retail and wholesale segments for all players involved.