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Telefónica, Telecom Italia in $9B Battle to Buy Brazil's GVT

Telefónica and Telecom Italia are engaging in a bidding battle to buy Brazilian broadband operator Global Village Telecom (GVT) from French media giant Vivendi, with both operators having tabled bids in excess of US$9 billion for the broadband and pay TV services provider.

The European rivals are both already active players in the Brazilian communications services market and are looking to strengthen their fixed-line and pay TV presence in the growing market, as the mobile services sector becomes saturated.

Telecom Italia (TIM) confirmed early Thursday that it has offered 21.02 billion Brazilian reais (US$9.36 billion) in stock and cash to Vivendi , in a deal that gives the French company a 16% stake in Telecom Italia and a 15% stake in TIM Participações (also known as TIM Brasil ), the Italian operator's majority-owned Brazilian operation into which GVT would be merged. Telecom Italia announced its intention to make an offer in mid August. (See Eurobites: Telecom Italia Eyes Brazil Merger.)

For the full financial details of Telecom Italia's offer, the majority of which is stock-based, see this announcement.

In terms of overall value, that bid trumps Telefónica's initial $8.9 billion offer for GVT, made earlier this month.

But Telefónica SA (NYSE: TEF) wants GVT, and it wants it bad. The Spanish operator, which wants to merge GVT with Telefônica Brasil S.A. (also known as Vivo), has increased its cash and stock bid to €7.45 billion ($9.8 billion). The new offer includes €4.66 billion ($6.14 billion) in cash and a 12% stake in Telefônica Brasil, once it is merged with GVT.

Vivendi says it is examining both offers.

For more on developments in the fixed-line services sector, check out our dedicated broadband services channel here on Light Reading.

The rivalry between the two bidders is made even more complex by the rivals' industrial relationship: Telefónica is (indirectly) the largest single shareholder in Telecom Italia, and the Spanish giant has somewhat cheekily offered Vivendi the option to take a 5.7% slice of the Italian operator in exchange for part of its post-deal stake in Telefônica Brasil "should Vivendi, S.A. be interested in acquiring a stable stake in Telecom Italia."

And just to make the situation even more complex, Brazilian mobile operator Telemar Norte Leste S.A. (Oi) is considering making a bid for a controlling stake in TIM Participações, Bloomberg reports.

GVT offers its broadband, VoIP and pay TV services in 152 cities across Brazil. In the first quarter of this year, it generated revenues of €405 million ($534 million) from its 6.75 million telecom customers (of which 2.7 million are broadband service users) and 715,000 pay TV customers.

As this market analysis shows, the sale of GVT to Telefónica would strengthen its position in the fixed-line and pay TV sectors, where it is already a significant player, whereas a sale to Telecom Italia would significantly add to the current market position of TIM Participações, which is currently a minor player in those sectors.

— Ray Le Maistre, Circle me on Google+Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

COMMENTS Add Comment
[email protected] 8/28/2014 | 7:55:22 AM
My money is on Telefonica Vivendi is trying to get out of telecoms and concentrate on media, so the T Italia offer of mostly telco shares looks much weaker than the offer of much more cash and a smaller stock holding.

A no brainer, I reckon.
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