The Spanish telecoms firm Telefonica has made an offer to buy 50 per cent of Brasilcel from Portugal Telecom for Ôé¼5.7 billion.
Brasilcel, which is currently owned jointly by Telefonica and Portugal Telecom, owns around 60 per cent of Brazilian wireless carrier Vivo Participacoes. Telefonica said it would make a tender offer to buy the shares of Vivo not currently owned by Brasilcel.
The offer, which was rejected by Lisbon-based Portugal Telecom, values Vivo Participacoes at around 140 per cent higher than its market capitalisation.
At the end of March, Brasilcel had 30 per cent of BrazilÔÇÖs 179 million wireless subscriptions.
In a statement, Portugal Telecom said that its board had met to review the merits of the offer but that the sale of Vivo, which is core to its strategy, ÔÇ£would be against the long term growth prospects of Portugal Telecom.ÔÇØ
The offer builds on TelefonicaÔÇÖs strategy to offset slowing growth in Europe by making acquisitions in Latin America, where Brazil is the biggest mobile phone market with a predicted growth in subscriber numbers of 11 per cent this year to 193 million subscribers.
Telefonica, which is headquartered in Madrid, is now expected to battle with Portugal Telecom for the lead in the Latin American market, where the Spanish company has spent more than $50 billion since the 1990s.
Portugal TelecomÔÇÖs Brazilian sales increased 4.1 per cent to Ôé¼3.23 billion last year, while its revenue from the domestic market declined 1.9 per cent.
Analysts have suggested that an offer of around Ôé¼8 billion might be enough to persuade Portugal TelecomÔÇÖs investors to push for a sale.
However, if unsuccessful, it is likely that Telefonica could seek other acquisitions in BrazilÔÇÖs mobile market such as TIM Participacoes, which is the third-largest wireless carrier behind Vivo and America Movil.
The Spanish company lost out to FranceÔÇÖs Vivendi in a takeover battle last year for the landline phone company GVT; however, it does control Telecomunicacoes de Sao Paulo, which offers home phone and internet services in the state of Sao Paulo. Analysts have suggested that combining the operations of that company with Vivo could save Ôé¼3 billion a year in costs.
TelefonicaÔÇÖs offer follows America MovilÔÇÖs plan earlier this year to acquire Telmex Internacional for $24.5 billion (approximately Ôé¼19.2 billion), to combine its wireless and landline operations in Brazil.
