For $9.7b, Telefónica finally gets Vivo

Michael Carroll
29 Jul 2010

Telefónica has finally won control of Brazilian cellco Vivo after buying partner Portugal Telecom out of their Brasilcel joint venture.

The Spanish telco upped its bid for the 50% Brasilcel share for a third time, agreeing to agreeing to shell out €7.5 billion ($9.7b) for Portugal Telecom’s 50% stake in Brasilcel.

It said the acquisition would immediately boost earnings and cash flow. It plans to combine Vivo – 60%-owned by Brasilcel - with its Telesp fixed-line venture in Brazil.

Telefónica last week threatened to dissolve the joint venture after the deadline for its previous €7.1 billion offer passed on July 16.

That offer was blocked by the Portuguese government in June, despite the majority of Portugal Telecom shareholders voting to accept it.

Portugal Telecom will use half of the funds it receives for Brasilcel to up its stake in rival Brazilian cellco Oi to between 20% and 25%, El Pais said, while Telefonica is widely tipped to combine Vivo with Telesp, its fixed-line business in the country.

Telefónica will initially outlay 40% of the agreed purchase price, and fork out an additional €4.5 billion when the deal closes, which it expects to happen within 60 days subject to Brazilian regulatory clearance.

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