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Telefónica’s board has pushed out its long-standing chair José María Álvarez-Pallete in a dramatic move that follows the arrival of Saudi Arabia’s STC as a shareholder in the Spanish telecoms group.
Telefónica announced on Saturday that it had fired Álvarez-Pallete and replaced him with defence executive Marc Murtra “in view of the company’s new shareholding structure” and the desire of some shareholders for a “new stage” in leadership.
The Spanish government had a decisive role in the move, which came after an investor shake up that began with the announcement by telecoms group STC that it was acquiring 9.9 per cent of Telefónica in 2023.
STC is majority-owned by Saudi Arabia’s sovereign wealth fund and the move stunned Spain as the first investment in one of its biggest companies by the Gulf state.
In response, the Spanish state increased its own stake in Telefónica to 10 per cent as a counterweight.
Álvarez-Pallete was called to a meeting at the offices of Prime Minister Pedro Sánchez on Friday to be told he would be ousted, according to one person familiar with the situation.
Telefónica’s board met to agree the decision on Saturday afternoon. It chose to pluck Murtra from another company part-owned by the state — Indra, a defence group known for its radar systems, where he was chair.
STC has said it wants to collaborate with Telefónica, praising the Spanish group’s “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 a strong return for the company to invest abroad after a period of retreat since its first foray when it acquired stakes in telecoms in India, Indonesia and Malaysia more than 15 years ago. The company has exited most of these investments but kept a stake in Malaysia’s Maxis.
However, as Saudi sovereign wealth fund PIF sought quick growth as part of the kingdom’s strategy to diversify its economy in recent years, STC has begun to look for opportunities to expand beyond its core market in the Gulf region where they operate telecoms in Kuwait and Bahrain in addition to Saudi Arabia. Tawal, an STC subsidiary, acquired tower infrastructure worth €1.22bn from United Group in 2023 for assets in Bulgaria, Croatia and Slovenia.
Telefónica, which has a market capitalisation of €22bn, is viewed as a strategic company because it is involved in national security issues and cyber defence, but it is also seen by some investors as a lumbering bureaucracy.
During Álvarez-Pallete’s nine years at the helm, Telefónica’s shares dropped by roughly 50 per cent at a time when the European telecoms sector was struggling. Last year it lost its position as the largest telecoms provider by customer number in Spain when Orange and MásMóvil merged.
The ousted chair, who worked at Telefónica for 26 years and led the company since 2016, had travelled 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 it is expected to seek to fill a current vacancy with one of its candidates.
In September 2023, the Saudi group revealed it had built a 4.9 per cent stake in Telefónica and purchased derivatives that gave it exposure to another 5 per cent of the company’s shares. It requested Spanish government permission to increase its stake to 9.9 per cent through the derivatives and that was granted in November.
After its move, Sepi, a Spanish state holding company, acquired a 10 per cent stake in Telefónica. The investment arm of the Caixa Foundation, which is close to the government and tied to the lender CaixaBank, also raised its stake to 10 per cent. Long-standing shareholder BBVA, another bank, owns 5 per cent of Telefónica.
As well as being fired, the company said Álvarez-Pallete had agreed to the board’s request that he resign as a director. The board said it unanimously expressed its “deepest gratitude” to him “for the many services rendered and for his extraordinary effort, dedication and contribution during his long professional career in the group”.
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