Telefónica €5.7B Bid for Vivo Rejected
With its €900 million (US$1.14 billion) acquisition of German operator Hansenet still smouldering on its books, the Spanish giant offered €5.7 billion ($7.23 billion) for Portugal Telecom SGPS SA (NYSE: PT)'s 50 percent stake in the pair's Brazilian joint venture, Brasilcel, which holds a controlling stake in operator Vivo Participacoes SA . (See Telefónica to Buy Hansenet.)
The offer, though, was rejected outright.
Portugal Telecom issued a statement late Monday saying its board had reviewed Telefónica's offer for Brasilcel, noting that "Vivo is core to PT’s strategy and the sale of its stake would be against the long term growth prospects of PT."
The Portuguese operator's first-quarter financial report shows Vivo's importance. Of its €1.77 billion ($2.27 billion) in revenues, Vivo contributed €883.4 million ($1.12 billion), half the total, and up more than 25 percent from a year earlier. Vivo ended March with 54 million customers, up more than 18 percent from a year earlier, giving it a 30 percent share of the Brazilian mobile market. (See Brazil Preps for Mobile Upheaval.)
The acquisition offer stands until June 6, and it seems likely Telefónica will come back with a higher bid as it looks to gain control of the lead mobile player in a growth market. Investors certainly seem to think the Spanish carrier will return with a higher offer, as Portugal Telecom's share price leapt 8.4 percent to €7.72 in Tuesday morning trading.
Telefónica's share price, though, dipped nearly 4 percent in Madrid to €15.91.
Telefónica is keen to further establish itself in the Brazilian market. It already owns fixed line carrier Telecomunicações de São Paulo S.A. (Telesp), and tried last year to bolster that business with a move to buy GVT but lost in a bidding war to Vivendi . (See TEF Goes Nuts for Brazil and Vivendi Floors Telefónica.)
Now it wants to take control of Vivo and merge it with Telesp to create a fixed/mobile services giant in Brazil.
Telefónica, which reported full year 2009 revenues of €56.7 billion ($71.9 billion), is already one of the giants of the global telecom sector, with 265 million customers worldwide. It has significant European assets (operations in Spain, the United Kingdom, Ireland, Germany, Czech Republic, and Slovakia, and its investment in Italy), a stronghold in Latin America (active in every major market), and a stake in China Unicom Ltd. (NYSE: CHU). (See Is Italian on Telefónica's Menu? , China Unicom, Telefónica Strengthen Ties, and Telefónica's New Battleground.)
— Ray Le Maistre, International Managing Editor, Light Reading