Spain Considers Stake in Telefonica After #Saudi Deal, In Protectionist Move - Bloomberg

Spain Considers Stake in Telefonica After Saudi Deal, In Protectionist Move - Bloomberg

Spain is considering whether to shield its “most strategic” company from foreign takeovers in what could be the government’s most significant protectionist move in more than a decade.

In an announcement Tuesday, the government’s corporate holding firm said it would undertake an “exploratory analysis” of a potential stake acquisition in Madrid-based telecom Telefonica SA. The statement came a day after it was reported that Spain was weighing a 5% stake in the carrier, and nearly two months after state-controlled Saudi Arabia Telecom announced plans to buy 9.9% of Telefonica SA.

Should Spain pursue the acquisition, it would limit the power of Saudi Arabia Telecom within the company.

The potential measure would mark a major shift for the Spanish government, which traditionally has been wary of intervening in the private sector. Even as many European countries have sought to move critical supply chains closer to home and ensure control over strategic industries in the wake of pandemic-related volatility and Russia’s invasion of Ukraine, Spain stands out in not having blocked major deals nor engaged in significant corporate rescues in recent years.

European leaders have been most uneasy about Chinese investment in the EU, but the growing presence of Middle Eastern money within the bloc is also starting to attract more scrutiny. In recent years, Gulf states have encouraged government-backed firms to diversify their holdings via international deals in sectors such as sports, healthcare and renewable energies.

Even though Spain and Saudi Arabia have long-standing diplomatic and trade relationships – Spain is a major arms supplier to the Gulf state – news of the Saudi Arabia Telecom investment prompted a backlash in Madrid from politicians across the political spectrum.