Telefonica bid for Vivo joint venture fails
SPAIN’S Telefonica has abandoned its €7.15bn (£6bn) bid to buy out Portugal Telecom from its Brazilian joint venture, after the deadline for the Portuguese firm to respond expired on Friday.
Telefonica, owner of O2 network, said it wouldn’t wait until 28 July for a decision on the Vivo venture, as requested by Portugal Telecom (PT).
PT failed to reach an agreement in a last-minute boardroom meeting on Friday night, despite hours of what it described as “constructive” discussions.
Both companies are now left with joint ownership of a 60 per cent stake in Brazil’s biggest mobile phone company, via holding firm Brasilcel, despite Telefonica twice upping its offer to take over the entire joint venture.
Earlier this month, a European Court of Justice ruling overruled the Portuguese government’s objections and paved the way for a deal. The government, which has a “golden share” preferential vote in PT, tried to veto the buy-out and still maintains its opposition, despite three-quarters of PT shareholders approving it.
The Lisbon government argued Portugal should retain its stake in the lucrative Brazilian market.
Both firms see Brazil as a key area for expansion, due to a young population and relatively low percentage of mobile phone ownership, coupled with stalling sales in Europe.
Telefonica hoped to merge Vivo with its underperforming fixed-line provider Telesp to strengthen its position in the country.
The Spanish group could take the long-running dispute over ownership to the Permanent Court of Arbitration in The Hague, to argue the joint venture is no longer sustainable and should be dismantled.