Telefónica offers Vivendi the option to buy its Telecom Italia stake

Telefónica said Vivendi could buy up to 8.3 per cent of Telecom Italia's voting share capital as part of a broader plan that could also see the Spanish operator buy Brazilian broadband provider Global Village Telecom (GVT) from the French group.

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Vivendi supervisory board chairman Vincent Bollore

On Tuesday, Telefónica launched an offer to buy GVT for a total value of €6.7 billion ($8.99 billion) in order to create a "new" Telefónica Brasil and strengthen the Spanish group's position on the important Brazilian market. Telefónica sells telecoms services under the Vivo brand in Brazil.

"The offer envisages that, should Vivendi be interested in acquiring a stable stake in Telecom Italia, Telefónica could offer Vivendi the acquisition, in cash, of up to 1,110 million ordinary shares of Telecom Italia," Telefónica said.

Vivendi confirmed that it had received an offer from Telefónica for its GVT unit, and that if this offer were accepted it would also have the opportunity to acquire 8.1 per cent of Telecom Italia. For GVT, the French company would receive 11.96 billion reais (€3.9 billion/$5.3 billion) in cash and a 12 per cent stake in Telefónica's Brazil unit.

Although Vivendi emphasised that none of its subsidiaries was for sale, it said the Vivendi supervisory board would consider the Telefónica offer at its next meeting in late August and decide what action to take.

The move to sell the Telecom Italia stake as part of a possible merger with GVT would certainly enable Telefónica to kill two birds with one stone: allay competition concerns in Brazil; and boost its existing operations by merging with a fast-growing player on the local broadband market.

"A combination of Vivo and GVT would create the largest telecom operator in Latin America's largest market, providing a unique platform for the generation of synergies and value creation," Telefónica said.

Telefónica has also been under pressure from Brazilian regulator Cade since it boosted its investment in Telecom Italia shareholder vehicle Telco last year. Cade has ordered Telefónica to either sell its shares in Telecom Italia or dispose of Vivo.

Reuters reported that Brazil's communications minister Paulo Bernardo said a Telefónica-GVT merger would face no major antitrust concerns.

It's not yet clear what Vivendi will do, but it previously tried and failed to sell its GVT unit in 2012. The French group has also been gradually discarding its telecoms assets, recently selling SFR to Altice, and Maroc Telecom to Etisalat, and analysts have regarded the retention of GVT within the now media-focused group as something of an anomaly.

According to Reuters, analysts have speculated that Vivendi supervisory board chairman Vincent Bollore would be open to selling GVT at the right price, and that the Telefónica offer would also likely usher in competing bids.

Indeed, Telecom Italia is believed to be in the frame, as a merger with GVT would help boost its local TIM Brasil unit. Telecom Italia CEO Marco Patuano recently said a merger of its Brazilian unit with a local operator was not on the agenda for now, but said he did not rule out the possibility of such a move in future.

For more:
- see this Telefónica statement
- see this Vivendi statement
- see this Reuters article
- see this separate Reuters article
- see this Bloomberg article

Related Articles:
Telecom Italia CEO rules in Brazil merger, stresses independence from Telefónica
Telefónica cuts stake in Telecom Italia through bond sale
Report: Telefónica in talks to sell Telecom Italia stake
Telecom Italia shareholder Telco approves break-up, makes €830M writedown
Telefónica to be largest investor in Telecom Italia

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