Report: Portuguese govt blocks Telefonica’s euro7.15B ($8.72B) bid for Brazil’s Vivo

Report: Portuguese govt blocks Telefonica bid

LISBON, Portugal — A news report says the Portuguese government has used its special voting rights to block Telefonica’s €7.15 billion ($8.72 billion) bid to buy Portugal Telecom’s stake in Brazil’s leading cell phone company Vivo.

Portuguese state-owned news agency Lusa said Portugal Telecom shareholders had voted Wednesday in favor of the sale of PT’s 50 percent stake in Brasilcel, a holding company which in turn owns 60 percent of Vivo. Spain’s Telefonica owns the other 50 percent of Brasilcel.

Government and Portugal Telecom officials could not immediately be reached for comment.

Lusa said the Portuguese state stepped in after the vote at a closed-door meeting, using its so-called “golden share” in Portugal Telecom which grants it the final say in strategic decisions.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

LISBON, Portugal (AP) — Spain’s Telefonica raised its bid for Brazil’s leading cell phone company Vivo to €7.15 billion ($8.72 billion) just hours ahead of a shareholder meeting which on Wednesday was considering the unsolicited offer.

The Spanish company hiked its offer for Portugal Telecom’s stake in Vivo from €6.5 billion in a bid to get a firmer footing in the fast-growing Latin American market.

Telefonica SA and Portugal Telecom SGPS SA each own 50 percent of Brasilcel, a holding company which in turn owns 60 percent of Vivo. Telefonica wants to buy from PT the half of Brasilcel it does not already have.

The sweetened cash bid came just before midnight Tuesday and was made public in a filing to Spanish securities regulators.

Telefonica needs a simple majority of votes at the closed-door shareholder meeting in Lisbon. PT provided no time for a vote.

The Lisbon stock exchange suspended trading in PT shares after they shot up 5.42 percent to €8.75 following the new offer.

Joao Pereira Leite, the head of investments at Banco Carregosa in Lisbon, noted that Telefonica’s offer was three times higher than Vivo’s market value a month ago.

“It’s a very generous offer. It makes sense (for PT) to sell,” he said.

Telefonica wants to add momentum to its expansion in Latin America, one of its main growth areas, and the Brazilian wireless market is the largest on the continent.

Brazil’s economy is booming despite a shaky global recovery, whereas financial gloom in Telefonica’s home territory of Spain is choking the company’s growth there.

Vivo’s revenue grew 4.1 percent last year to €3.24 billion.

Telefonica is expected to integrate Vivo wireless operations with its Telesp fixed-line services in Brazil, saving costs and broadening its appeal to customers.

Telesp and Vivo already represent the largest telecom force in Brazil’s fast-growing market, having together more than 62 million clients and 85,000 employees.

Last November, Telefonica lost its battle to take control of Brazilian telecommunications operator GVT SA after it was outbid by France’s Vivendi SA.

PT’s board has rejected Telefonica’s overture, saying Brazil is at the heart of its growth strategy.

PT’s chief executive, Zeinal Bava, has said that selling off Vivo “would amputate PT’s future” by stunting its prospects for long-term growth.

However, analysts say PT would have plenty of investment opportunities if the deal goes through.

“Today, with the market drops, market instability and a shortage of credit, a company with a lot of cash has tremendous opportunities to make money,” Carregosa’s Pereira leite said.

“When there’s an international crisis, there must be a lot of people out there who really need capital and who would be very interested in having a partner like PT which has a lot of money to invest,” he said.

Telefonica originally offered €5.7 billion for Vivo in May. It then raised the offer to €6.5 billion before hiking it further to €7.15 billion — more than PT’s market capitalization at the time of the original bid.

Telefonica also has investments in Mexico, Argentina and Chile, as well as in Britain and the Netherlands.

PT also has interests in three of Portugal’s former African colonies — Angola, Cape Verde, and Sao Tome and Principe — and in Macau and East Timor, the country’s tiny former territories in Asia.

The domestic earnings of PT and Telefonica are hurting from the European economic downturn.

PT reported last month a first-quarter profit of €100 million — down almost 40 percent from the same quarter last year.

Telefonica’s first quarter sales in Spain were down by 5.7 percent to €4.6 billion but its income in Latin America rose 4.2 percent to €5.62 billion.

Telefonica is a much larger company than Portugal Telecom, employing some 237,000 people compared with the around 32,000 staff at its Portuguese counterpart.