The tussle between Portugal Telecom and Spain’s Telefonica over their shared assets in Brazilian mobile operator Vivo looks set to take another twist. According to Spain’s El Economista, PT is likely to buy a stake in Brazil’s Oi to replace its stake in…
The tussle between Portugal Telecom and Spain’s Telefonica over their shared assets in Brazilian mobile operator Vivo looks set to take another twist. According to Spain’s El Economista, PT is likely to buy a stake in Brazil’s Oi to replace its stake in Vivo as soon as it sells its share of Vivo holding company JV Brasilcel to its Spanish competitor.
The newspaper cites unnamed sources close to the deal that claim that PT has signed a pre-contract agreement with Oi to make a significant investment in the operator, and faces severe financial penalties if it does not take up the option before expiry at the end of the month.
Part of the reason PT was so reluctant to relinquish its stake in Vivo was that it saw Brazil and Latin America as a growth market in the face of declining domestic revenues. With a stake in Oi, PT can maintain its presence in Brazil and use the company to leverage its operations into other markets in South and Central America.
The acquisition of a controlling stake in Oi would also go a long way to persuading the Portuguese government to lift its ‘golden share’ veto blocking the transfer of Vivo to Telefonica.
Oi was championed by many in Brazil, including President Luiz Inacio Lula da Silva, as key to creating a national telecoms champion that could evolve into a global titan. However, the plans to create that national champion were stillborn when Brasil Telecom’s tie-up with its parent company Oi – the first phase in creating a Brazil telecom major – was rejected by its own shareholders last month. BrT was itself the offspring of a merger.
But if these reports from El Economista are proved true, soon Brazil might have no domestically-owned telecom operators at all.
The PT/Telefonica deal should go through in the next ten days, according to the financial sources quoted in the report, which means that PT will have E7.15bn (US$9.3bn) to deploy in the Brazilian market, if that is the course the Portuguese operator wants to take.
Nevertheless, the traditional formal channels of communication have stonewalled any discussion on the speculation and Telefonica stated that its E7bn had been withdrawn and it had taken legal counsel on the process of breaking up Brasilcel, the holding company that operates Vivo.
