Telefonica to indulge in hostile bidding for Portugal Telecom
www.WirelessFederation.com/news: If Spanish telecom company, Telefonica fails to persuade the Portugal Telecom to sell out its Brazilian mobile phone joint venture, it is ready to engage into hostile takeover bid of the Portuguese company. Pressure has also been build up by Telefonica finance director Santiago Fernandez Valbuena on Portugal Telecom’s shareholders by announcing that it might block the Portuguese company’s access to dividends from the joint venture.
Telefonica is Portugal Telecom’s largest shareholder, with a 10 per cent stake and the two companies are said to be entangled by an unhappy marriage in Brazil with Telefonica looking for exclusive control of Brazil’s largest mobile operator Vivo.
An investor roadshow in Europe and the US will be started by Valbuena with a hope that some Portugal Telecom shareholders will back Telefonica €5.7bn ($7bn) offer to buy the Portuguese company out of Vivo, their joint venture. He also insisted that Telefonica would not raise its offer.
Telefonica Brazilian fixed-line phone business, Telesp is also underperforming amid increased competition and the telco wants to improve its position by merging Vivo and Telesp so that it can secure €2.8bn of cost savings. Due to Portugal Telecom’s skepticism about the merger, Telefonica had to make an offer to buy the Portuguese company out of Vivo.
Two Portugal Telecom shareholders have backed the board’s rejection of the €5.7bn offer, but Valbuena claimed other investors were interested. Telefonica and Portugal Telecom jointly own Brasilcel, a holding company with a controlling stake in Vivo. In case the offer fails, Portugal Telecom’s ability to secure Vivo dividend payments via Brasilcel might be blocked by Telefonica.
Depending upon the performance by Vivo in 2009, Brasilcel is due to pay a dividend of €111m each to Telefonica and Portugal Telecom this year. According to Valbuena, it would be crazy for Telefonica to pursue a takeover of Telecom Italia if the Spanish group’s offer to buy Portugal Telecom out of Vivo fails.
