Telefónica's board made the dramatic move to oust long-time chairman José María Álvarez-Pallete after Saudi Arabia's STC became a shareholder in the Spanish telecom group. .
Telefonica announced on Saturday that "given the company's new shareholding structure" and the desire of some shareholders to enter a "new phase" in leadership, it had fired Alvarez-Pallet and replaced him with defense chief Marc Mutla. (Marc Murtra) replaced him.
The Spanish government played a decisive role in the move after telecoms group STC announced it would acquire a 9.9% stake in Telefónica in 2023, triggering a shakeup among investors.
STC is majority-owned by Saudi Arabia's sovereign wealth fund, a move that shocked Spain and marked the Gulf state's first investment in one of its largest companies.
In response, the Spanish government increased its stake in Telefónica to 10% as a counterweight.
Alvarez-Pallet was summoned to a meeting at Prime Minister Pedro Sánchez’s office on Friday and told he would be removed from office, according to a person familiar with the matter.
Telefonica's board of directors met on Saturday afternoon and agreed to the decision. It chose to poach Murtra from another partly state-owned company, Indra, a defense group known for its radar systems, where he serves as chairman.
STC said it wanted to work with Telefónica, praising the Spanish group for its "best-in-class infrastructure assets" and cutting-edge technology in areas such as cognitive intelligence and the Internet of Things.
STC's investment in Telefónica marks the company's first foray into overseas investment since it acquired stakes in telecom companies in India, Indonesia and Malaysia 15 years ago, and comes after a period of strong returns following a pullback. The company has exited most of its investments but retains a stake in Maxis Malaysia.
However, as Saudi Arabia's sovereign wealth fund PIF has sought rapid growth in recent years as part of the kingdom's economic diversification strategy, STC has begun looking for opportunities to expand beyond its core market into the Gulf, where they operate telecoms businesses in Kuwait and Bahrain in addition to Saudi Arabia. Arab. STC subsidiary Tawal acquired €1.22 billion worth of tower infrastructure from United Group in 2023, acquiring assets in Bulgaria, Croatia and Slovenia.
Telefónica, which has a market value of 22 billion euros, is seen as a strategic company because of its involvement in national security issues and cyber defense, but is also viewed by some investors as a clumsy bureaucracy.
During Alvarez-Pallet's nine years at the helm, Telefónica's share price fell by about 50% as Europe's telecoms industry struggled. Last year, Orange and Más Móvil merged, and the company lost its position as Spain's largest telecommunications provider by number of customers.
The ousted chairman, who has worked at Telefónica for 26 years and has led the company since 2016, has traveled to Saudi Arabia at least once to discuss Telefónica's future with STC executives.
STC does not have a seat on Telefónica's 15-member board but is expected to seek a candidate to fill the current vacancy.
In September 2023, the Saudi group revealed that it had taken a 4.9% stake in Telefónica and purchased derivatives to acquire another 5% of the company. It asked the Spanish government for permission to increase its stake to 9.9% through derivatives, and was approved in November.
Following the move, Spanish state holding company Sepi acquired a 10% stake in Telefónica. The investment arm of the Caixa Foundation, which has close ties to the government and is linked to lender CaixaBank, also raised its stake to 10%. Long-term shareholders in another bank, BBVA, own 5% of Telefónica.
In addition to being fired, Alvarez-Pallet agreed to the board's request to resign as a director, the company said. The board said it was unanimous in expressing its "deepest gratitude" for his "many services and extraordinary hard work, dedication and contribution during his long career with the Group".