By Inti Landauro and Andres Gonzalez

MADRID (Reuters) – Spanish telecom giant Telefonica (NYSE: ) agreed on Saturday to appoint defense company Indra’s chairman Marc Murtra as its new CEO, replacing Chief Executive Officer Jose Maria Alvarez-Pallete following a fund request. of SEPI government.

The board of Telefonica held an extraordinary meeting on Saturday to decide to terminate the contract of Alvarez-Pallete and give his job to Murtra, who accepted, the company said in a letter to the market regulator.

The proposal still needs to be approved by shareholders, the company said.

State investment fund SEPI has decided to replace Alvarez-Pallete, who has led the company since 2016, with Murtra, a person familiar with the matter told Reuters earlier on Saturday.

Alvarez-Pallete’s current term was due to be renewed this year at the annual shareholders’ meeting usually held in April or May.

Under Murtra, Indra, which is 28% owned by the Spanish government, has focused on its defense and aerospace business to benefit from European countries’ increased military spending following the escalation of international conflicts.

The Spanish government bought a 10% stake for 2.3 billion euros ($2.36 billion) in Telefonica through SEPI in May 2024 to counter a takeover of the same value by Saudi Arabia’s STC at the end of 2023.

The acquisition gave the government a seat on Telefonica’s board.

Since Telefonica is recognized as a security provider and therefore a good company, the government only approved this in November 2024 after acquiring a share in the same telecom company as STC.

In the past years, Telefonica, like its rivals in Europe, has faced the difficulties of profiting from fierce competition and the need for large investments to develop the infrastructure of the next generation 5G technology.

It has been selling shares in mature businesses such as submarine cables or mobile platforms and smaller projects in Latin America to support 5G and optic fiber.

($1 = 0.9736 euros)

(This article has been edited to change the title)