By Inti Landauro and Andres Gonzalez
MADRID (Reuters) – State investment fund SEPI has proposed to replace Telefonica (NYSE: ) 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 the executive chairman of defense company Indra, which owns a majority stake in SEPI, the source said.
The changes will be decided at a board meeting sooner rather than later, another source with knowledge of the matter told Reuters. Shareholders will have to ratify any board decision at a general meeting.
Both sources confirmed an earlier report by news website El Confidencial.
Alvarez-Pallete's current term was due to be renewed this year at the annual general shareholders' meeting.
Under Murtra, Indra, which is 28% owned by the Spanish government, is focusing on its defense and aerospace business to benefit from the increased military budgets of European countries after increasing global pressure.
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 match the acquisition of the same by Saudi Arabia's STC in late 2023.
On May 8, after reaching 7% of the company, the government asked for a seat on the board of Telefonica and recommended Carlos Ocana, former head of the business cabinet, to represent the interests of the government.
In recent years, Telefonica, like European players, has faced a squeeze on profits from tough competition and the need for heavy investment in the infrastructure of 5G mobile technology of the next generation.
It sold shares in more mature businesses such as submarine cables or mobile masts and smaller operations in Latin America to finance 5G and optic fiber.
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