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Telefonica and TI to lock horns over Brazil

Telecom Italia confirms its interest in Vivendi's GVT unit, but would need to outbid Telefonica, while Vodafone lurks too


Published: 18 August, 2014


Telecom Italia will soon be locking horns with its major shareholder Telefonica, as both telcos bid for Vivendi's Brazilian unit, GVT, according to new reports.

The latest twist in the saga of the rapidly growing Brazilian telecoms and media market sees Telecom Italia preparing a bid worth up to €7bn. According to unnamed Bloomberg sources, the deal would give Vivendi a 20% stake in the Italian operator as well as a holding in the Brazilian firm that would result from the combination of GVT - a broadband and TV provider - with TI's TIM Brasil mobile carrier.

Earlier this month, Telefonica proposed to buy GVT from Vivendi - the French group which has been divesting various non-core assets - and merge it with its own Brazilian cellco, Vivo. It offered about €3.9bn plus a 12% stake in the combined unit but in the wake of TI confirming its interest on Monday, the Spanish telco was reported to be planning to match the bid. That would increase the total value of its offer from €6.7bn to €7bn, with the additional sum coming from a content sharing deal, according to Reuters.

The Telefonica plan would also pave the way for Vivendi to gain a stake in Telecom Italia. The Spanish carrier is reducing its holding in its Italian peer, to between 8.3% and 9.4%, in order to appease Brazilian antitrust regulator CADE, which has objected to the size of Telefonica's stake in two of the country's main cellcos, TIM Brasil and Vivo. Under the Telefonica plan for GVT, Vivendi would have the option to buy 8.3% of Telecom Italia, reducing the Spanish giant's holding to just 1.1%, or even zero.

"Telecom Italia confirms that it is undertaking a detailed review to determine whether it may be opportune to submit an offer to Vivendi to create an industrial combination that would include integration of the Brazilian businesses of the two groups," was all TI would say in response to the latest reports, stressing no bid had yet been put on the table.

If Telefonica wins the race, it would alleviate antitrust concerns in Brazil while merging with a rapidly growing player; while a TI victory would allow it to offload its troublesome relationship with Telefonica, improve its Latin American presence and possibly expand at home too, via a rumored bid for media group Mediaset.

Meanwhile Vodafone, an arch-rival to both Telefonica and TI in Europe, is also said to want to snatch a share of the Brazilian market. It is reported to be considering a bid for one of the country's cellcos. The big three are Vivo, America Movil's Claro and TIM, with the last of these being the most likely to be its target. Brazil is too strategic to Telefonica and Movil, which run a near-duopoly in many Latin American regions, to relinquish, but TI's financial pressures might tempt it to consider a sale or joint venture.

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