August deadline for Vivo?

Spanish super telco Telefonica has issued an August deadline to Portugal Telecom for a response to its bid of Euro3bn for full control of Brazilian mobile operator Vivo, according to reports.

It’s no secret that Telefonica has been chasing full control of Vivo, which with 28 million subscribers is the largest MNO in South America. In fact, it’s a fair bet that the Spanish giant has been seeking to wrest control of the joint venture since its inception over four years ago.

Telefonica chairman Cesar Alierta told UK newspaper the Financial Times that Vivo’s performance had suffered because of tensions between Telefonica and Portugal Telecom. The unit has lost ground in Brazil to Claro, which is owned by America Movil.

“Vivo hasn’t had an easy ride,” wrote analyst firm Ovum in reaction to the news. “As the only CDMA operator, it has seen its market share decrease from 31 per cent in Q2 2006 to 27 per cent in Q2 2007. Although Vivo is the market leader, its GSM rivals are hot on its heels with TIM Brazil having almost 27 million customers and America Movil 25.4 million as GSM is taking the lion’s share of new connections in the market. The struggle to win market share led Vivo to launch a GSM network in July 2006 but it has a long way to go in the GSM war, with just two per cent of its customer base currently on GSM.”

However, a spokesman for the Spanish carrier told that Alierta did not mention a price tag or indeed a deadline during the FT interview. “The situation remains the same. We’re interested at the right price. PT won’t sell until it has something else in Brazil. It made a bid for Telemar, but we will have to wait and see,” he said, adding: “We’re been talking with PT for months and months. I think they know what we want to pay and we know what they want.”

Telefonica’s Euro2.3bn payment for a 10 per cent stake in Telecom Italia was apparently a defensive move after America Movil, the Latin American mobile phone group, also tried to buy the same stake from Pirelli according to Alierta.

That would have enabled America Movil to create Brazil’s biggest mobile unit by merging its Claro unit with Tim Brasil, Telecom Italia’s Brazilian mobile unit. However, Alierta ruled out a merger between Vivo and Tim Brasil on regulatory grounds.

“Telefonica’s Executive Chairman is also quoted as saying Telefonica would not rule out the possibility of taking control of Telecom Italia, following its April 2007 purchase of 42.2 per cent of the operator. This may provide some regulatory hurdles in Brazil, given that TIM Brazil operates here too. Telefonica is claiming it would not merge the two operations, but this may not be enough to satisfy the regulator,” wrote Ovum. “The rumours of shareholder difficulties are not going to assist Vivo’s fight back in the long run, so it is in the Brazilian operator’s interests to have a clear strategic direction and soon,” stated the firm.


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