Criteria Caixa, the investment holding company of Fundación La Caixa, had stepped on the accelerator in the stock market in the purchase of Telefónica shares. It is a routine of the firm chaired by Isidro Fainé since six years ago he began to build a relevant stake in the operator. However, the pace of orders had grown to reach its peak on the eve of Easter, when the transfer of power in Telefónica’s shareholding was completed with the announcements of Caixabank (exit after the deferred sale in another percentage of the company) and the SEPI, to begin with, with the expected landing of the Government.
Criteria Caixa increased its stake in Telefónica in March from 2.56% to 2.63% of the capital after investing 18.5 million euros in the purchase of 4.7 million shares, according to data recorded by ‘La Información’. For the first time, the holding company exceeds the percentage in the hands of its participating bank Caixabank, which this Monday at market close announced that it will reduce its participation from 3.51% to 2.51% after the partial liquidation of a coverage it contracted on that share package. It is the second time in just two years that the bank has reduced its participation after the movement in the same direction that it made in September 2022. Simultaneously, the State Society of Industrial Participations (SEPI) notified the CNMV that it exceeds 3% of the capital . of Telefónica, valued at 698.3 million euros at Monday’s closing price.
The entry of SEPI seeks to provide shareholder stability after the entry of STC. Together with BBVA and Fundación La Caixa, the Spanish ‘core’ will control 20% of Telefónica’s shares
Criteria Caixa began buying Telefónica shares in 2017. Since then it has invested 810 million euros in acquiring the aforementioned 2.63% stake (151.4 million shares) of the operator. The current value of this participation is slightly above 600 million (5.34 euros per share), that is, 25% below the gross cost of its acquisition. However, the holding company has allocated part of Telefónica’s latest cash dividends to reduce the book value of its investment. In total, Criteria has allocated 60 of the 148 million euros in dividends in six years to reduce the cost of its entry in accounting.
The change of shareholding power to three parties occurs in the context of the plans to configure a new shareholding core in the owner of Movistar and O2 before the emergence last September of STC, the state operator of Saudi Arabia that is controlled by in turn by more than 64% by its sovereign fund PIF. After the share transfer these days, the Arab investor remains Telefónica’s first shareholder with 9.9% of the capital, divided into 4.9% directly in shares and another 5% in convertible derivatives, the execution of which is “pending and conditioned” to the approval of the council of ministers of the Sánchez Government.
The second official position in the shareholding is for BBVA (4.87% of the capital), ahead of the American manager BlackRock, which declares an aggregate position of 4.48% of the capital through its funds and ETFs, part of which in securities lending and, ultimately, a short or bearish position on -0.6% of one of its ‘hedge funds’ that has kept Telefónica under pressure on the stock market in recent months. The North American investor Canada Pension Plan Investment Board (CPPIB) is also bearish with -0.7% of capital.
In fourth place on the table is Vanguard Group, which owns more than 3.16% of Telefónica through its different funds, according to the latest data consulted by ‘La Información’. The rise of the American giant is, in part, unexpected, according to financial sources. Vanguard has doubled its aggregate position in 12 months despite the fact that the Spanish company’s price has remained stable below 4 euros. In addition, the firm is a passive money manager that replicates indices whose composition has barely changed in relation to the telecommunications group.
The fifth element: the return of SEPI
Finally, SEPI is now officially a shareholder of Telefónica again. At the moment, it is fifth on the list with 3,044% after its announcement on Monday, although its initial objective is to reach 10% of the operator in the short term. This is stated in the order issued in December by the Sánchez Government. The investment arm of the state thus returns to Telefónica’s shareholding after the privatization of 1997, when it sold its remaining 20.7% for 3,786 million euros.
Its definitive exit occurred in 1999 with the sale of another 0.2%, according to the state entity on its website. Comparatively, the sales valuation of 18,000 million euros would be equivalent, adjusted for decades of inflation, to 32,000 million today, so the Goborno is buying 28% cheaper than when it sold almost three decades ago. Telefónica is not the same either. It is an operator with a greater international presence, focused on digitalization and whose income no longer only depends on providing access to voice calls or internet access, but is linked to additional products for its clients.
“The entry of SEPI, a shareholder with a vocation for permanence, will allow Telefónica to provide greater shareholder stability to achieve its objectives, contributing to the safeguarding of the strategic capabilities of a company strategic for national interests due to its leadership in the telecommunications sector and its industrial capabilities, determining factors in areas such as security and defense,” according to its statement.
New source of dividends
In that sense, SEPI (10%), BBVA (4.8%), Criteria Caixa (2.63%) and Caixabank (2.51%) will add 20% of the operator’s shares when the state entry concludes. The investment arm of the Spanish Government and Saudi Arabia are not the only public vehicles in Telefónica. Norway’s sovereign fund, present in more than 70 Spanish companies, had 1.95% of the capital at the end of 2023 and Japan’s owns around 0.6% of the shares.
Telefónica will also occupy the State’s stock market investment portfolio, whose joint value rises to 30,000 million euros once 10% of the operator is reached, where it is expected to invest more than 2,000 million in total. In addition, the operator will contribute around 170 million euros in dividends. The Government will be able to count on more than 1,500 million euros of income from this channel in 2024, almost double that of the previous year.
The normalization of dividends from Aena and CaixaBank after the pandemic is added to the increase in Airbus’s remuneration, the maintenance of Indra’s payment and the expectation of collection from Telefónica, the latest addition to the state portfolio that is still in progress. However, Enagás has been the discordant note by cutting its dividend almost in half to finance its future investments in hydrogen. Overall, the increase in shareholder return has been accompanied by a solid revaluation of the value of the portfolio, exceeding 29 billion, which includes the stakes in IAG (Iberia, Vueling), Ebro Foods and Redeia.
