Telefónica sells stake in Portugal Telecom

Spanish incumbent and Latin American carrier Telefónica has sold eight per cent of its ten per cent stake in Portugal Telecom (PT) amid fears it will not be allowed to vote as a PT shareholder on the acceptance of its offer to buy PT out of Brasilcel,which controls Brazilian mobile player Vivo .

Telefónica upped its offer for PT’s 50 per cent stake of Brasilcel from €5.7bn to €6.5bn in early June.

Telefónica has not revealed the identity of the buyers of the PT stake, although it is understood to be one or more existing PT shareholders. Telefónica is counting on the buyers coming out in favour of its proposed buyout when the vote takes place on June 30th. Based on PT’s market capitalisation, the stake is worth just short of €650m, and Telefónica will retain a two per cent ownership stake in PT.

The current stalemate reflects the strategic importance attached to Brazil in general, and Vivo in particular, by both European incumbents. The market had 185.45 million cellular subscribers at the end of Q1 this year, according to data from Informa’s World Cellular Information Service with Vivo accounting for 53.94 million.

Telefónica’s bid to assume control of Vivo is born out of frustration at its inability to execute its favoured multiplay strategy in the Brazilian market. The Spanish firm already has a fixed presence through Telesp, and is keen to merge the two Brazilian operations and take a converged offering to the lucrative enterprise market. Portugal telecom is known to be sceptical of such a move.

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