Ending a months-long standoff with the Portuguese government, Spanish carrier Telefónica said it has reached an agreement to buy Portugal Telecom’s stake in Brazilian wireless carrier Vivo Participacoes SA. Lisbon agreed to the deal after Telefónica, which had already upped its bid multiple times, said it would add another $455 million to the purchase price.
Portugal Telecom will use the proceeds of the $9.7 billion buyout to purchase a 22 percent stake in Oi, Brazil’s largest carrier, for $4.8 billion.
Mobile services in fast-growing economies like Brazil represent an important growth opportunity for established carriers, and the struggle for Vivo, which serves about 58 million subscribers, or 30 percent of the market in Brazil, embroiled two Iberian carriers along with the Portuguese government and the European Union. The saga began in May, when Telefónica, which operates a joint venture with PT that owns 60 percent of Vivo, launched a buyout bid that would give it majority control over the wireless carrier. The deal was approved by three-quarters of PT’s shareholders.
Saying that Vivo represents a critical growth engine for PT, though, the Portuguese government immediately stepped in to squelch the deal. Lisbon planned to use its so-called “golden share" – state-controlled stakes that give governments veto power over strategic decisions at formerly state-owned companies, including national carriers – to block the deal.
Earlier this month the European Union’s highest court ruled in favor of Telefónica’s bid, saying that Portugal’s “golden share" in Portugal Telecom is illegal.
Telefonica raised its initial bid to $9.3 billion, but the stalemate continued until it added another $455 million this week. While the deal is considered wildly overpriced, it gives Telefónica chairman César Alierta an important victory as he seeks new growth markets for the Spanish carrier. Telefónica shares are up slightly in midday trading on the New York Stock Exchange.
Vivo said it plans to double the number of cities it covers next year.
