opinion


If rumors of GVT sale are true, Telefonica will not be the only interested party

Revenue from Latin America now accounts for 49 per cent of Telefonica's overall turnover

Rumors in the market say that that Vivendi is interested in selling GVT, the same company that it disputed with Telefónica for two months in 2009. The price paid by Vivendi, nearly BRL3.5bn ($1.75bn), was considered very high and surprised the entire market, which had never seen this company in a price war for an acquisition before.

Telefónica seemed shocked with the result and deeply regretted not having bid aggressively. GVT was very strategic for Telefónica at that time. Its operations were concentrated in Sao Paulo and the acquisition of GVT would have been an opportunity to expand fixed telephony and broadband across the country through an operator that was performing well in the market. Now, after three years, would Telefónica still be interested in acquiring GVT?

Although GVT remains a very attractive operator as it is performing well in the market, the market has changed significantly since Telefónica tried to acquire it in 2009. First, the Spanish economy is chaotic and it will be challenging for Telefonica to get the approval and money necessary to acquire the company. Secondly, Telefónica has merged its fixed and mobile assets with Vivo, enabling it to expand from Sao Paulo to other regions.

GVT is not only an attractive asset for Telefonica but also for America Movil, which owns NET and Embratel. However, the two operators would face some barriers from the antitrust agency. In the fixed-line market, GVT would increase Telefónica’s market share significantly, while in the broadband market Telefónica and NET would face the same problem. In the pay-TV market, the only impediment would be that they would need to return some licenses to Anatel depending on the region, as GVT just launched the service and has few users.

For America Movil, the acquisition of GVT would put its operator NET in a strong position in the market. GVT and NET are the only operators that are growing in the fixed-line market, the major incumbents Oi and Telefónica are declining year after year. In the broadband market, NET and GVT are also increasing at an intense pace. Finally, in the pay-TV market, NET would eliminate a potential threat for its market leadership. However, this is not America Movil’s typical strategy, as the operator generally buys companies with bad assets, which is not the case with GVT.

For Oi, GVT is not as strategic as it is for its main competitors. Apart from the market concentration, the operator would face other barriers. Oi is struggling in the market and does not have cash to buy GVT. Additionally, the merger of Brasil Telecom, acquired in 2008, was very difficult for Oi, making the company lose competitiveness in the market. It is unlikely that Oi would want to go through the same thing again so soon. Finally, it would have to return several licenses to the regulator.

Tags:

Leave a comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Polls

How have open source groups influenced the development of virtualization in telecoms?

Loading ... Loading ...