Telefonica SA TEF stock is trading lower after it disclosed that Saudi Telecom Co Group, the leading communications operator in the Kingdom of Saudi Arabia and the Middle East, has acquired a 9.9% stake in Telefónica.
The acquisition of shares representing 4.9% of the share capital of Telefónica and through financial instruments provides an economic exposure over the other 5% of the company's share capital.
The move will likely draw Spanish government scrutiny, which views Telefonica as a company of strategic importance.
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Saudi Telecom said it does not plan to gain control or take on a majority stake in Telefonica.
Spain can block stake acquisitions beyond 5% for companies considered strategic for national security and defense, as with Telefonica. Another threshold for further government approval is 10%.
The Telefonica deal is the Saudi firm's second foray into Europe in 2023 after the firm agreed to buy a portfolio of tower assets from United Group for $1.3 billion in April.
Price Action: TEF shares are trading lower by 4.19% at $4.01 on the last check Wednesday.
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