Telefónica starts 'new journey' in Brazil after approval of GVT deal

Telefónica said it is beginning a "new journey in the Brazilian market" after receiving approval from Brazil's antitrust authority Cade to acquire fixed-line operator Global Village Telecom (GVT) from Vivendi.

The Spanish headquartered operator also said it plans to raise €3 billion ($3.3 billion) in a rights issue to help fund the acquisition. The listing of the new shares is expected to take place on Apr. 21.

Cade approved the deal on a conditional basis this week, paving the way for Telefónica Brasil to start the integration process of both companies and create the number one operator in Brazil in terms of customers and revenue, with a combined 100 million subscribers.

One condition is that Telefónica unwind any stake in Milan-based Telecom Italia, which in turn controls rival mobile operator TIM Participacoes, Bloomberg noted. Cade also approved the breakup of Telco SpA, which is the biggest shareholder in Telecom Italia. Telefónica is the largest Telco stakeholder.

Telefónica Brasil said it would propose Amos Genish, the current CEO of GVT, as its new president and CEO. Genish will take on the position after the closing of the acquisition. The current CEO of Vivo, Paulo César Teixeira, is to leave the Telefónica group. Telefónica Brasil markets its mobile services under the Vivo brand.

Telefónica chairman Cesar Alierta welcomed the final approval of the deal, noting that Brazil is "one of the strategic markets for the group's future growth, with excellent prospects and where the company has invested €55 billion since its entrance in 1996."

The approval by Cade, which follows authorisation by telecoms regulator Anatel, brings to an end a process that began in August last year, when Telefónica and Vivendi entered into exclusive negotiations over GVT.

Telefónica agreed to acquire GVT for just over €7 billion in cash and stocks last September. As well as receiving €4.6 billion in cash, Vivendi will also receive 7.4 per cent of Telefónica Brasil shares at a stock market value of €2.02 billion, and 5.7 per cent of Telecom Italia shares at a value of €1.01 billion.

Telecom Italia had also expressed interest in buying GVT, but lost out to its Spanish rival. The company now plans to invest more than €4 billion on improving 3G and 4G coverage in Brazil. It has reportedly dropped plans to pursue a merger with Brazil-based operator Oi--at least for now.

For more:
- see this Telefónica presentation on the rights issue and GVT
- see this Bloomberg article

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