Telefónica's Path to Public Ownership Once Again
Telefónica, Spain's leading telecommunications company, is set to have a significant portion of its shareholding acquired by the Spanish Public Participation Company (SEPI), the country's state-owned investment vehicle. This move, which would see SEPI acquire up to 10% of Telefónica's shareholding, marks a significant shift in the company's ownership structure, returning it to public hands after its privatization in the late 1990s.
Beyond being a purely financial transaction, this move represents a new era in which the boundaries of power are no longer limited by national borders. Instead, they are expanding to encompass a broader, global scale. This new era is marked by the need to control at least a portion of a critical company for national security (one that provides services to the government and the military), while also avoiding undue foreign influence.
This new trend was highlighted by the surprise entry of Saudi Telecom Company (STC) into Telefónica's shareholding in the summer of 2022, a move that was announced by Telefónica's CEO, José María Álvarez-Pallete, in Los Angeles. This move is seen as the beginning of a measured trend that China is pushing for, as it seeks to use its petrodollars to gain global influence.
One of the first cases that raised some alarms in this regard was the acquisition of the Greek port of Piraeus by Cosco, a Chinese state-owned enterprise, in 2016. Cosco paid €281 million for a 51% stake in the port operator and committed to investing an additional €88 million for a 16% stake a year later. The company also agreed to pay an annual fee to the Greek government for the concession.
Before this, Greece had to give up its stake in airport management, which was taken over by the German company Fraport. These operations were carried out under the conditions imposed by Greece during its bailout. However, the acquisition of the Greek port of Piraeus by Cosco was not an isolated case.
Chinese companies now control more than 100 ports in 68 countries, according to data published by the BBC in 2021. In the case of Arab countries, the relationship with telecoms has become increasingly important in recent years. Saudi Arabia is the second-largest investor in European telecoms, and in late 2022, Etisalat, the telecom giant from Abu Dhabi, increased its stake in Vodafone to 11% of the capital, becoming its largest shareholder.
The Spanish government has sought to avoid a repeat of the Telefónica case, with Nadia Calviño, the Spanish economy minister, describing the company as "Spain's most strategic asset." The government has approved a €2 billion investment in the telecom company for reasons of national security, to retain sovereignty over telecommunications.
The government has also expressed its intention to form a "Spanish nucleus" within Telefónica's board of directors by allying with BBVA and Caixabank, which currently hold around 10% of the company's shareholding. While the main opposition party, the People's Party, has criticized this move as "populist," other conservative voices have defended it, such as José María Lassalle, the former secretary of state for culture during the Rajoy government.
Lassalle has defended the decision, while also criticizing the privatization of the 1990s. He has also pointed out that even liberal countries like the United States are changing their approach to controlling certain strategic sectors. For example, US President Joe Biden has signed an executive order restricting US investment in strategic areas of China, such as quantum computing.
This move is complemented by other measures aimed at limiting China's access to US technology, such as controls on the export of advanced semiconductors to China. Other European countries, such as Germany, have also taken similar measures to limit foreign investment in strategic sectors. For example, Germany has limited Cosco's participation in a terminal at the port of Hamburg to 25% to prevent it from making decisions that could affect the port's operations.
In summary, the acquisition of Telefónica's shareholding by the Spanish government represents a significant shift in the ownership structure of one of Spain's most strategic assets. This move is part of a broader trend of countries seeking to control critical infrastructure and technology to protect their national security interests. While this trend is not new, it has become increasingly important in the context of the growing influence of China and other countries in strategic sectors.
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