2023-09-08 15:04:50
The purchase of 9.9% of Telefónica by Saudi Telecom (STC), controlled in part by Saudi Arabiacomes to the table European Comission. Brussels will have to officially rule on the operation following a battery of questions recorded by the United Left MEP, Manu Pinedawhich has demanded the activation of the foreign direct investment control mechanism (FDI) of the European Union to stop a purchase that makes STC the largest shareholder of a strategic telecommunications company in the EU.
Also the Citizens MEPs Eva Poptcheva y Jordi Cañas have addressed the European Commission to request its opinion on this acquisition, “which affects a strategic company for the national security of Spain, especially given the services it provides to the Spanish Armed Forces.” In an urgent written question, the deputies propose that the Commission give the Government of Spain a recommendation on the authorization of this purchase,
“Does the Commission consider that the STC purchase of 9.9% of Telefónica “Does it pose a threat to security as it is a company controlled by a third state and a strategic sector of critical technologies and infrastructure?” “And does the European Commission think it should intervene to prevent an absolutist regime like Saudi Arabia from controlling an important part of the telecommunications sector in the EU?” Pineda asks in a parliamentary question registered this Friday. According to the chamber’s regulations governing parliamentary questions, the Commission now has a period of 6 weeks to respond in writing.
As the Spanish politician explains, “the entry into Telefónica of the Kingdom of Saudi Arabia – an autocratic regime of absolutist monarchy that is very far from the minimum standards of democracy and the rule of law and that systemically violates human rights – represents a clear threat to the security and strategic independence of the EU.” He also maintains that Telefónica is a company of “strategic” charactersince it offers a fundamental service and manages millions of sensitive data from public, private and citizen institutions, and that is why “we cannot allow them to be controlled by private capital and by third countries” and “it is necessary for the State to return to have majority control.”
Case-by-case evaluations
So far Brussels has avoided ruling on the case. “The Commission is not in a position to comment on individual transactions for reasons of confidentiality,” its spokespersons said at the beginning of the week. “We trust 100% in the decision of the Member States. We have tools and if they believe there is a risk they can use them”, he limited himself to adding the internal market, Thierry Bretonduring a meeting with a group of journalists in reference to the European framework for the control of foreign direct investment existing since October 2020 at the European level.
Its objective, as recalled this week by a community spokesperson, is to identify and address possible threats to security or public order in the EU that may be caused by certain foreign investments, without reducing the EU’s openness to foreign investment or restricting activities of foreign investors in the Union. “The Member States and the Commission evaluate, case by case, whether a specific acquisition threatens security or public order and, if so, suggest appropriate measures to mitigate those risks. The prohibition of foreign direct investment is considered in cases where risk mitigation does not seem possible,” the same sources explained about a mechanism in which Brussels participates but whose final decision rests with the Member States.
Decision in the hands of Spain
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“The decision on which investments are controlled, approved, conditioned or blocked is taken by the Member States in which the investment is made,” Brussels recalls in its latest annual report. According to the document, in 2021 – the last year for which data is available – Member States notified 1,563 authorization requests. Of these, approximately 29% were formally examined. About 71% of all applications were deemed inadmissible or did not require formal examination due to “a clear lack of impact on public safety and order.” On the other hand, 23% of the decisions implied an approval with conditions or mitigating measures, while only the 1% of all cases were blocked and in another 3% the parties withdrew the transaction.
This, according to Brussels, confirms that the EU “remains open to foreign direct investments and that Member States only reject cases that pose very serious threats to security and public order”. The same balance confirms that 13 EU countries submitted a total of 414 notifications in 2021 and that five Member States –Germany, Austria, France, Italy and Spain– accounted for more than 85% of such notifications. In addition, the five sectors with the highest number of transactions were Information and Communication Technologies (ICT), the manufacturing industry, financial activities, wholesale and retail trade and construction.
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