Telefonica ( TEF Quick Quote TEF - Free Report) is reportedly getting an investment from a leading telecom operator in Saudi Arabia — STC Group. STC Group has acquired a substantial 9.9% stake in Telefonica, per a report from Reuters.
STC will now become Telefonica's leading shareholder by investing a substantial €2.1 billion, which is equivalent to $2.25 billion. This substantial stake comprises 4.9% of the company’s shares, with an additional 5% of economic exposure through financial instruments. STC's plan includes seeking regulatory approval to secure voting rights for this 5% interest held through these financial instruments.
This investment in Telefonica marks STC's second venture into Europe's telecom market, following its agreement to acquire tower infrastructure valued at €1.2 billion from United Group in April.
Telefonica has been grappling with profitability challenges due to fierce competition and the substantial investments required for 5G’s next-generation mobile technology infrastructure. In response, the company has been divesting stakes in more mature businesses, such as submarine cables and mobile masts, to finance its 5G and optic fiber initiatives.
The company divested its non-core mobile phone masts in Europe and Latin America to U.S.-based telecom infrastructure operator — American Tower Corporation. The transaction, worth €7.7 billion euros ($9.41 billion) in cash, is likely to help Telefonica reduce its huge debt burden. Per the deal, Telefonica is selling 30,700 tower sites across Spain, Germany, Brazil, Peru, Chile and Argentina as it seeks to de-lever its balance sheet.
Looking ahead, Telefonica is gearing up to unveil a new strategic plan on Nov 8, with a primary focus on growing the company's free cash flow. The company expects that this figure could reach €4 billion this year, added the report.
Telefonica provides mobile and fixed communication services in Europe and Latin America. The company continues to invest heavily in deploying and transforming its network to provide excellent connectivity in all dimensions, capacity, speed, coverage and security.
TEF currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 6% against the
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