By Chris Dziadul
When Telefónica Deutschland held its annual general meeting (AGM) on 1 July, management was expecting a relatively routine affair. With Telefónica S.A. now holding around 97% of the company following its 2024 delisting, the meeting was an opportunity to demonstrate that the new ownership structure was working effectively.
Instead, it became a showcase for shareholder frustration. Management faced more than 250 questions from minority shareholders over the course of an eight-hour meeting, which was held virtually and behind closed doors to journalists. Much of the scrutiny focused on Telefónica Deutschland’s relationship with its Spanish parent, including intra-group cash pooling arrangements, dividend policy and whether minority investors are receiving the protections intended under German corporate law.
Under the cash pooling system, the German company provides the Spanish parent with liquidity through the internal bank Telfisa Global B.V., and as of the end of fiscal year 2025 Telefónica Deutschland held €221 million, or 95% of its cash balance. Just as importantly, the company’s contributions to this fund increased from an average of €243 million a month in 2024 to €320 million a month between January and May last year.
Significantly, the shareholders have not been paid a dividend since Telefónica Deutschland’s delisting from the Frankfurt Stock Exchange. At that time, the parent company made it clear that it would no longer pay dividends for subsequent financial years on the grounds that it wished to prioritise reinvestment and speed up debt reduction in Telefónica Deutschland.
The AGM did little to settle the debate. One month later, the dispute has moved into the courts. According to a Bloomberg report[1] published in early August, subsequently confirmed by El Pais, Mainberg Asset Management has now asked the Munich Regional Court to compel Telefónica Deutschland to disclose additional information about the group’s cash pooling arrangements, arguing that the company refused to answer Mainberg’s questions on the conditions of the cash pool, citing “sensitive financing and negotiation parameters”.
Telefónica continues to maintain that all intra-group transactions, including cash pooling arrangements, are conducted on market terms and supported by independent advisers. However, a 2025 investigation by Spanish tax authorities into the group’s transfer pricing arrangements resulted in adjustments relating to financing activities and a reallocation of a larger share of cash-pooling benefits within the group. Such scrutiny arguably demonstrates a broader challenge: even where a company believes its arrangements are compliant, unresolved governance questions can become a strategic issue in their own right.
Another specific area of concern for minority shareholders is the independence of Telefónica Deutschland’s Supervisory Board, with its chairman Peter Löscher, a former Siemens CEO, also sitting on the board of directors at the parent company. Others on the Board and closely tied to Madrid include Julio Linares López and Ángel Vilá Boix, while CEO Santiago Argelich Hesse has been in post since January 1 this year and already initiated far-reaching changes in the subsidiary.
Hesse replaced Markus Haas, who had been with Telefónica Deutschland since 2001, and moved quickly in the first half of this year by overseeing a reduction in the size of the board of directors from seven to six members and assuming additional leadership responsibilities – all this points to a centralisation of power, with the German business coming increasingly under the direct control of its parent company.
To make matters worse, not long after the AGM Telefónica Deutschland announced plans to reduce its full-time workforce by up to 1,100, or 14-16% of the total, by the end of this year. The plans form part of a restructuring plan that was not mentioned at the AGM despite repeated questioning and have further soured relations between the company and its minority shareholders.
That legal filing comes at an important moment for Telefónica Deutschland. The company is under pressure to improve performance after losing a major wholesale contract with 1&1, which has proven difficult to offset.
Mainberg’s request for financial information might just be the start of legal proceedings. Ahead of the AGM, Philip Hardung, a partner at Hausfeld, a leading international law firm specialised in claimant group actions, questioned whether the cash pooling arrangements were on “arm’s-length terms and whether Telefónica Deutschland received an adequate reciprocal benefit.” If it turns out that they fell short of this bar, legal action from other minority shareholders will be likely to follow swiftly.
This is clearly not the start that Telefónica Deutschland’s CEO will have wanted in his recently assumed role. The start of legal proceedings will also cause concern for the Board of Directors, and if it is found not to have discharged its duties in the interests of the German subsidiary legal action could follow.
For Marc Murtra, whose message since taking over as head of Telefónica in January 2025 has been one of simplification, focus and disciplined execution, this is an unwelcome distraction. Rather than drawing attention to strategy, Telefónica is again facing questions about governance, transparency and the treatment of minority shareholders. For a company focused on efficiency and strategic focus, taking 100% ownership of the subsidiary would remove a source of governance friction and allow management to concentrate fully on the future of one of its most important European markets. More than two years after taking near-total control of Telefónica Deutschland, the group is still spending management time defending a governance structure that it would seem to have the power to change.
