State-owned SEPI proposes to replace Telefonica CEO

By Inti Landauro and Andres Gonzalez

MADRID (Reuters) – State-owned investment fund SEPI has proposed to replace Telefonica (NYSE:)’s Chief Executive Jose Maria Alvarez-Pallete, who has led the company since 2016, a source with knowledge of the matter told Reuters on Saturday.

The candidate to replace Alvarez-Pallete is Marc Murtra, currently executive chairman of defence company Indra, whose largest shareholder is SEPI, the source said.

The change would be decided in a board meeting to be held sooner rather than later, another source with knowledge of the matter told Reuters. Shareholders would have to ratify any board decision in a general assembly.

Both sources confirmed an earlier report by news website El Confidencial.

The current term of Alvarez-Pallete was due for renewal this year at the annual general shareholders assembly.

Under Murtra, Indra, which is 28% owned by the Spanish government, has focused on its defence and aerospace business to benefit from European countries’ increased military budgets following heightening world tensions.

Telefonica declined to comment and no one at Indra was immediately available for comment.

The Spanish government bought a 10% stake worth about 2.3 billion euros ($2.36 billion) in Telefonica through SEPI in May 2024 to counterbalance the acquisition of a similar stake by Saudi Arabia’s STC in late 2023.

On May 8, after having reached a 7% stake in the company, the government requested a seat on Telefonica’s board and proposed Carlos Ocana, a former industry ministry cabinet chief, to represent the government’s interests.

Over the past years, Telefonica, like rivals in Europe, has faced a squeeze on profitability from fierce competition and the need for hefty investment in infrastructure for the 5G next-generation mobile technology.

It has been selling stakes in more mature businesses such as submarine cables or mobile masts and smaller operations in Latin America to fund 5G and optic fibre.

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