By Inti Landauro and Andres Gonzalez
MADRID (Reuters) – State investment fund SEPI has proposed to oust Telefonica (NYSE: ) CEO Jose Maria Alvarez-Pallete, who has led the company since 2016, a source familiar with the matter told Reuters on Saturday.
The candidate to replace Alvarez-Pallete is Marc Murtra, currently executive chairman of the defense company Indra, whose largest shareholder is SEPI, the source said.
The change will be decided at a board meeting sooner rather than later, another source familiar with the matter told Reuters. Shareholders would have to confirm every decision of the board at the general assembly.
Both sources confirmed an earlier report by the newspaper website El Confidencial.
Alvarez-Palleta’s current term was due to be renewed this year at the annual general meeting of shareholders.
Under Murtra, Indra, which is 28% owned by the Spanish government, has focused on its defense and aerospace businesses to benefit from increased military budgets by European countries following rising global tensions.
Telefonica declined to comment, and no one at Indra was immediately available for comment.
The Spanish government bought a 10% stake in Telefonica in May 2024 through SEPI worth about 2.3 billion euros ($2.36 billion) to counterbalance the acquisition of a similar stake by Saudi Arabia’s STC in late 2023 .
On May 8, after reaching a 7% stake in the company, the government requested a seat on Telefonica’s board of directors and proposed Carlos Ocana, a former chief of staff at the industry ministry, to represent the government’s interests.
Over the past years, Telefonica, like its rivals in Europe, has faced pressure on profitability due to fierce competition and the need to invest heavily in infrastructure for next-generation 5G mobile technology.
It has sold stakes in more mature businesses such as submarine cables or mobile masts and smaller operations in Latin America to fund 5G and fiber.
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