Vivo's Value

7:45 AM -- Portugal Telecom SGPS SA (NYSE: PT)'s second-quarter financial results show just why the Portuguese operator held out for a higher price when selling its stake in Brazilian mobile operator Vivo Participacoes SA . (See Portugal Telecom Posts Q2 and Viva La Vivo Deal.)

Vivo contributed €1 billion (US$1.32 billion) in sales, more than half Portugal Telecom's second-quarter revenues, and 44 percent of its EBITDA (earnings before tax and other stuff). That's a lot of sales and earnings to let go.

No wonder, then, that Telefónica SA (NYSE: TEF), which is buying Portugal Telecom's 50 percent stake in Brasilcel, the holding company that controls Vivo, had to increase its offer by €1.8 billion ($2.38 billion) to €7.5 billion ($9.9 billion) to land its prize.

Vivo's contribution helped Portugal Telecom deliver higher-than-expected second-quarter revenues of €1.91 billion ($2.53 billion), up 17 percent from a year ago, and net profit of €164.2 million ($217 million), 82.5 percent better than a year ago.

To plug the gap in its Brazilian operations, Portugal Telecom is taking a 22.38 percent stake in service provider Tele Norte Leste Participacoes S.A., better known as Oi, for 8.4 billion Brazilian Reais ($4.8 billion).

— Ray Le Maistre, International Managing Editor, Light Reading

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