Telefonica has reportedly already engaged lawyers to look into breaking up Brazilian joint venture Brasilcel, days after the expiration of its takeover bid for the unit.
The operator has hired Dutch law firm De Brauw Blackstone Westbroek to explore how to dissolve the Brasilcel holding company, which controls 60% of contested Brazilian mobile operator Vivo, an insider told the Wall Street Journal.
Brasilcel is incorporated in the Netherlands, and the law firm advised the parties on the setting up of the JV in 2000.
Telefonica withdrew a €7.15 billion bid for Portugal Telecom's stake in the venture on Saturday, ending months of attempts to secure ownership of the unit.
Now, the operator is looking to dissolve the Brasilcel unit in an attempt to circumvent the Portuguese government, which blocked the sale despite the majority of Portugal Telecom shareholders giving the thumbs up.
Any legal dispute would likely be held in arbitration court, the source said. The likely outcome would either be an order to split the Vivo stake between the companies, or a two-participant auction for the shares with the highest bidder receiving the lot.
An auction could raise the possibility of the parties getting embroiled in a bidding war of attrition, with the winner paying much more than the stake in Vivo is truly worth.
Telefonica last week threatened to dissolve the JV if the deadlock continues.