Telefónica dumps exec chairman amid shareholder pressureTelefónica dumps exec chairman amid shareholder pressure

His replacement is Marc Murta (pictured above), who joins from Spanish defence company Indra, where he served as executive chairman, a position he now takes up at Telefónica.

At what appears to be a hastily-arranged meeting on Saturday, the Spanish incumbent's board voted to terminate Álvarez-Pallete's contract as executive chairman and to request his resignation as a director. Álvarez-Pallete duly complied with both decisions and with that, his 26-year career at Telefónica is done and dusted.

The official announcement is couched in terms so ambiguous that it is impossible to interpret it as anything other than a sacking.

Telefónica said the decision was taken in light of its "new shareholding structure and that some of its relevant shareholders have expressed the convenience of embarking on a new stage in the executive chairmanship."

These "relevant shareholders" are likely to be representatives of a Spanish government keen to maintain a close watch over what it considers a strategically significant national asset.

Indeed, according to a source cited by the Financial Times, Álvarez-Pallete was called to a meeting on Friday at the offices of Prime Minister Pedro Sánchez, where he was told he would be getting booted.

In late November, Saudi Telecom Company (STC) – which is majority owned by Saudi Arabia's Public Investment Fund (PIF) – finalised a deal with Spain that paved the way for its acquisition of a 9.9% stake in Telefónica, bringing to a climax a saga that began back in September 2023.

The prospect of a foreign government becoming the incumbent's biggest single shareholder ruffled a few big feathers in Madrid, which responded by increasing its holding in Telefónica to 10%, giving it a fractionally larger stake – and therefore greater control – than STC.

The new shareholder structure is expected to bring about changes to Telefónica's board, with the general understanding that both STC and the Spanish government have permission to request representation.

The latter seems keen to make sure that whatever happens to the board, it will be chaired by a friendly face – one who until now has worked for a defence company. It implies that national security – and Telefónica's responsibilities regarding it – will be front of mind for the new chairman.

Álvarez-Pallete's ousting comes as Telefónica faces off against a new and bigger rival in MasOrange, which has also just finalised an agreement to establish a fibre joint venture with Vodafone.

Telefónica is also just over a year into its latest strategic plan, GPS. Launched by Álvarez-Pallete in November 2023, it aims to boost free cash flow (FCF) generation from €4 billion in 2023 to €5 billion in 2026, aiding the telco's debt-reduction effort while enabling it to continue with dividend payments.

With new people calling the shots, a shift in strategy is not out of the question.

As for Álvarez-Pallete, he was re-elected as chair of the GSMA in October, and it will be interesting to see whether he stays in that role, given that as things stand, he doesn't currently work for one of the industry group's members.

He also received the kind of public send-off from Telefónica that is usually reserved for struggling football managers after a run of bad results:

"The board of directors has unanimously expressed its deepest gratitude to Mr. José María Álvarez-Pallete for the years of work and collaboration with the Telefónica Group and, specially, for the many services rendered and for his extraordinary effort, dedication and contribution during his long professional career in the Group."

Maybe it sounds more heartfelt in Spanish.