The European Court of Justice has ruled Portugal’s golden share in Portugal Telecom illegal, offering hope to Telefonica that its bid to buy into Brazilian carrier Vivo could still go ahead.
The court delivered its verdict on the Portuguese government’s stake in the incumbent telco on Thursday, stating that the share “constitutes a restriction on the free movement of capital.”
It added that the government’s involvement in the running of the telco means any buyer “could not be involved in the management and control,” which is likely to deter carriers from other European countries investing in the Portuguese firm.
The court also criticized Portugal for failing to detail the criteria for using the golden share, which it believes should only be used to protect national security.
Portugal Telecom is tipped to offload the shares quickly to prevent EC intervention, but the process could take months to complete, WSJ.com reports.
The court ruling leaves Telefonica clear to mount a legal challenge against the use of the golden share to block its acquisition of Portugal Telecom’s 50% stake in their Brasilcel joint venture.