Portugal’s golden share in Portugal Telecom has been ruled to be illegal, offering Spanish rival Telefonica hope that its bid to buy Brazilian carrier Vivo could still go ahead.
The European Court of Justice delivered its verdict on the Portuguese government’s stake in the incumbent telco this morning, stating that the share “constitutes a restriction on the free movement of capital,” and that Portugal has “failed to fulfill its obligations,” regarding capital movement by maintaining the share.
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 the government 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, however 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.
Some 74% of Portugal Telecom shareholders voted to accept the Spanish firm’s €7.15 billion bid for the stake at an EGM last week, but the government vetoed the deal at the eleventh hour, claiming it wasn’t in the national interest.
Brasilcel holds a majority stake in Brazilian mobile carrier Vivo, which Telefonica is keen to merge with its fixed-line operator Telesp.