Telefónica takes lead in Brazil with €7.5bn Vivendi deal
Spain’s Telefónica has stormed ahead in the battle for Brazil’s telecoms market, convincing Vivendi to choose its €7.45bn offer for the French group’s Brazilian broadband business.
Vivendi said on Thursday it would enter exclusive negotiations with Telefónica over the sale of its Brazilian unit GVT, shunning a lower offer from Telecom Italia.
Telefónica plans to fold GVT into its existing Brazilian mobile business Vivo, already the country’s wireless market leader, setting the Spanish group up to be the dominant telecoms operator in Brazil.
More than 40m Brazilians have entered the middle class over the past decade – equivalent to four times the population of Portugal – turning the Latin American country into an essential market for global telecoms companies.
However, a recent growth slowdown in the mobile market has prompted a frenzy of consolidation among the industry’s largely foreign players and forced them to branch out into pay-TV and broadband – GVT’s focus.
For Vivendi, the sale of GVT also represents a pivotal moment in the company’s history. It would complete the French group’s transformation over the past year from a sprawling conglomerate into a pure media and entertainment group. It also marks a dramatic change in fortunes for the Paris-based company after it failed to find a buyer for GVT last year.
Telefónica’s sweetened offer includes €4.7bn in cash and a 12 per cent stake in the combined Brazilian entity. Under the deal, Vivendi can exchange one-third of that stake for a 5.7 per cent stake the Spanish group owns in Telecom Italia – an option it will probably choose, according to a person close to the deal.
The Spanish telecoms group had previously approached Vivendi with an offer worth about €6.7bn, but improved the bid as news emerged that Telecom Italia, which likewise has a large presence in Brazil, had submitted a rival offer.
Telecom Italia’s offer represented a total enterprise value of €7bn, consisting of a €1.7bn cash component, 16 per cent of Telecom Italia’s share capital and a 15 per cent stake in its TIM Brazilian operation.
But Vivendi said that it had opted to enter negotiations with Telefónica “in the light of the group’s strategy and in the best interests of its shareholders”.
Vivendi said it considered Telefónica’s offer “particularly attractive” because it would generate a capital gain for Vivendi of more than €3bn.
“The other conditions of the offer, limiting to a strict minimum the risk of executing the operation as well as Vivendi’s commitments after the sale, are totally in line with Vivendi’s objectives,” Vivendi added.
Telefónica’s victory will be closely scrutinised by Brazil’s antitrust body, Cade, which has voiced growing concern over the frantic wave of dealmaking in an industry vital to the country’s economic and social development.
It also presents a dilemma for Brazil’s Oi, which indicated on Wednesday that it is considering an acquisition of Telecom Italia’s Brazilian business.