www.Investinbrazil.biz | 30 June 2010.

 

Telefonica, the Spanish telecoms company, Tuesday announced that it intends to raise its bid for Portugal Telecom’s stake in the holding company that controls Vivo, the Brazilian mobile phone operator, to about €7.15 billion from the initial offer of €6.5 billion. This is the second time the Spanish telecoms company is increasing its bid for the biggest Brazilian telecoms firm, Vivo, through the takeover of Portugal Telecom SGPS SA’s stake in the company.

 

The change marks an increase of 10% on the Spanish bid, coming just hours prior to an approval vote from the shareholders of the Portuguese company over the deal.  The announcement was made in a regulatory filling that comes in the wake of Telefonica, the JV partner with Portugal Telecom, on the venture that controls Brazil’s Vivo Participacoes SA, having boosted its existing offer by 14% to €6.5 billion on June 1^st to gain shareholder approval.

 

Telefonica plans to invest in the acquisition of a major controlling stake in Vivo in order to merge it with its other fixed line unit in Brazil, Telecomunicacoes de Sao Paolo SA (Telesp), to enable it reduce costs and provide packages of home-phone and wireless service. The JV between the two firms was entered in 2001.

 

According to analysts though, the Portugal shareholders should find the investment increase an incentive sufficient for approval of the bid, terming it as a token gesture to the Portuguese firms shareholders.  In a nutshell, the hiked offer bolsters the chances of shareholders sale approval to 70% from the initial 50%.

 

Telefonica’s bid comes in the wake of another bid by America Movil’s $23 billion takeover of Telmex Internacional SAB this month in a bid to consolidate its wireless and land line operations in South America. Initially, the Portuguese Telecoms firm’s board had turned down a €5.7 billion bid by Telefonica, forcing Telefonica to revise upwards to €6.5 billion which, according to the board, still did not reflect the strategic value of the asset for Telefonica.

 

The Spanish company has heavily lobbied foreign investors in PT, which include Brandes Investment Partners and Deutsche Bank, many of which also hold shares in Telefonica. Many analysts think the vote could nevertheless go against Telefonica as shareholders try to squeeze up to 7.5 billion euros out of the Spanish telecoms giant. But foreign investors who control about 65 percent have been less vocal about their intentions and could vote either way.