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. Last Updated: 07/27/2016

Chief of Spain's Telefonica Said Ready to Step Down

MADRID, Spain -- The embattled head of Spanish telecoms giant Telefonica, Juan Villalonga, has agreed to resign Wednesday and will be replaced by Cesar Alierta, the chairman of tobacco group Altadis, an industry source said.

Telefonica will appoint Alierta as the new chairman at a board meeting on Wednesday.

"Until it is made official at the board ? there is room for surprise, but right now it's 99.99 percent likely that Alierta will substitute Villalonga," said the source, who is close to the negotiations over the widely expected resignation.

Officials at Telefonica and Altadis declined to comment.

Villalonga f Spain's best-known businessman with a yen for brokering major deals f is under investigation for alleged insider trading, claims that Telefonica has firmly denied.

His position at Telefonica f Europe's fourth biggest telecoms company f has looked tenuous since last year after relations with Spanish Prime Minister Jose Maria Aznar, a former school friend, soured.

The government in recent weeks backed Telefonica's leading shareholders, Banco Bilbao Vizcaya Argentaria and savings bank La Caixa, in pressing for Villalonga to step down, market and corporate sources said.

Newspapers said Alierta would be flanked by one or more senior executives to run the day-to-day business.

The favorite for the post of chief executive was respected former Telefonica executive Fernando Abril-Martorell. Head of Telefonica Moviles, Luis Lada, could also be named to an executive position, some reports said.

Unlike Villalonga, whose title was executive chairman, Alierta is likely to be simply given the title of chairman, sources said.

Villalonga stood to leave his post with a "golden handshake," a severance package estimated at around $25 million, newspapers reported.

Alierta, like Villalonga, is a former investment banker.