Spain’s Telefonica has reached an initial agreement to buy Portugal Telecom’s stake in Brazil’s Vivo Participacoes after raising its bid a third time to €7.5 billion, according to reports.
The agreement was said to be reached late yesterday, with the boards of both companies yet to ratify it. Madrid-based Telefonica holds its monthly board meeting today.
Telefonica raised its offer by 32 per cent from its initial bid in May to gain control of Vivo, Brazil’s largest wireless company. It is thought the company would merge Vivo with Telecomunicacoes de Sao Paulo (Telesp), the Spanish company’s fixed-line unit in Brazil, in order to capitalise on growth there as its business back in Spain slows.
Vivo had 30 per cent of Brazil’s 179 million wireless subscriptions at the end of March. The Latin American country is growing at the fastest pace in more than two decades as European demand slows.
Portugal Telecom has relied on Brazil for growth, with sales there rising 27 per cent in the first quarter as revenue at home fell by 3.6 per cent.
Vivo has now become Portugal Telecom’s biggest revenue contributor, accounting for half of its total sales in the first quarter of this year.
Telefonica’s current offer for the stake in Vivo is almost as high as Portugal Telecom's market capitalisation of €9.37 billion.
In June, 74 per cent of Portugal Telecom's shareholders voted to accept an offer from Telefonica, but the Portuguese government blocked the sale using a golden share which allows the government to veto sales in key companies. The current deal, however, is said to have the blessing of the Portugese government.
For its part, Portugal Telecom is reportedly planning to use the proceeds from the Vivo deal to take a stake in Brazil's Oi, the country’s biggest phone operator.
