STC announced on Tuesday that it has paid 8.5 billion Saudi riyals ($2.27 billion) for a 9.9% interest in Telefonica, a Spanish company.
STC, the largest mobile operator in the country, will be able to increase its global presence in important markets thanks to the cooperation.
The Middle East and North Africa region’s leading provider of digital goods and services, STC, declared it had no plans to take controlling ownership of Telefonica.
According to Mohammed Al Faisal, chairman of STC Group, “Telefonica and STC Group share a lot in common with a vision to use technology to link people and a strategy to drive growth.”
“STC Group is continuing its growth strategy as we invest in crucial technology and digital infrastructure sectors with this long-term, significant investment,”
One of the biggest telecom firms in the world, Telefonica is based in Madrid and has operations in Brazil, Germany, Spain, and the UK.
In order to increase its free cash flow, which the company estimates might reach €4 billion ($4.3 billion) this year, Telefonica is set to submit a plan in November.
The most recent investment is consistent with STC’s expansion ambitions and growth strategy.
According to investment bank EFG Hermes, “the investment supports STC’s capital recycling efforts and growth strategy to expand in promising markets and profit from the return on these investments, which enhances the company’s ability to invest in new domains and maximize shareholder returns in a sustainable manner.”
The long-term effects of this investment will be favorable, and they won’t have an impact on STC’s approved dividend policy.
STC finished its €1.22 billion acquisition of the communications tower assets from the Netherlands-based United Group last month.
The Internet of Things (IoT) business Machinestalk was purchased in full by iot squared, a joint venture between STC and the Public Investment Fund, the sovereign wealth fund of the monarchy, in the same month.
The Riyadh-based Machinestalk’s field services capabilities, technology, unique IoT platforms, internal development capabilities, local and international partner as well as client contacts will offer value for iot squared, according to a previous article from the Saudi Press Agency.
According to Olayan Alwetaid, chief executive of STC, the company’s investment in Telefonica demonstrates STC’s confidence in the company’s “leadership, strategy, and ability to create value.”
Instead, Mr. Alwetaid added, “We see this as a compelling chance to invest to use our strong balance sheet while maintaining our dividend policy. We are not looking to acquire control or a majority stake.”
Telefonica stated in an SEC filing that it “takes note of STC’s welcoming manner and its backing to the management team, Telefonica’s strategy, and Telefonica’s ability to create value.”
The largest economy in the Arab world, Saudi Arabia, said earlier this year that it will invest more than $9 billion in its technology industry to support the country’s digital transformation.
According to Abdullah Alswaha, Saudi Arabia’s Minister of Communications and Information Technology, the investments are spearheaded by a $2.1 billion promise from Microsoft, which would develop a super-scaler cloud in the nation.
They also include $400 million from China’s Huawei to improve Saudi Arabia’s cloud infrastructure as well as Oracle’s promises to contribute $1.5 billion to increase the nation’s cloud computing capacity.