Vivendi enters into exclusive talks with Telefónica on GVT

Vivendi confirmed on Thursday it has entered into exclusive negotiations with Telefónica on the Spanish company's offer to buy its Brazilian broadband unit Global Village Telecom (GVT), in a blow to Telecom Italia.

In an emailed press release, the French group said it believed the Spanish operator's offer was more attractive and that the conditions of the offer were in line with Vivendi's objectives. It added that the sale of GVT would complete its disposal of all fully-owned telecoms assets after the previous sales of Maroc Telecom to Etisalat and SFR to Altice.

"The agreement between Telefónica and Vivendi would allow the development of joint projects in content and media. In addition, if it so wish, Vivendi could become a shareholder in Telecom Italia by exchanging its Brazilian shares for Italian ones," Vivendi said.

Earlier in the day, the French group confirmed it had received binding offers for GVT from both Telecom Italia and Telefónica.

The offer from Telecom Italia represented a total enterprise value of €7 billion ($9.2 billion), including a cash part of €1.7 billion, a part in Telecom Italia shares (16 per cent of share capital and 21.7 per cent of voting rights) and a part in TIM Brasil shares (15 per cent).

Telefónica, which previously made a bid for GVT that valued the unit at €6.7 billion, improved its offer to €7.450 billion including €4.663 billion in cash. The offer also includes a part in Telefónica Brasil shares (12 per cent), of which about one third can be exchanged at Vivendi's discretion for 5.7 per cent of the share capital, and 8.3 per cent of the voting rights in Telecom Italia.

"In the light of the group's strategy and in the best interests of its shareholders, the supervisory board decided to enter into exclusive negotiations with Telefónica while emphasising the relevance and quality of the Telecom Italia offer," Vivendi said.

The moves by the Italian and Spanish operators had been much anticipated, and highlight the importance of the Latin American market as a future area of growth. The two operators already compete in Brazil via Telefónica's Vivo and TIM Participações (TIM Brasil), and are now looking at ways to boost their position and seek greater market consolidation.

Vivendi's decision will come as a disappointment to Telecom Italia, which wanted to create a "global partnership" with Vivendi through three phases that would ultimately lead to the merger of GVT with TIM Brasil.

In a statement, the Italian company said it noted Vivendi's decision to enter into exclusive negotiations with Telefónica in relation to the sale of GVT, and added that it plans to pursue its development and investment plans in the country in line with its 2014-2016 business plan.

Telecom Italia's Brazilian unit continues to be of interest to other players, meanwhile, and Brazil's Oi on Wednesday confirmed reports it has hired Banco BTG Pactual to examine a possible proposal to buy shares in TIM Brasil. Telecom Italia has denied any knowledge of or involvement in Oi's plans.

It has previously been speculated that Telecom Italia, which has so far stressed that TIM Brasil is a strategic asset, would be more open to selling the unit if its plan to buy GVT fell through.

For more:
- see this Vivendi statement

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Reports: Telefónica, Telecom Italia prepare GVT bidding war, as Oi eyes TIM Brasil
Report: Vodafone targets TIM Brasil acquisition to enter Brazilian mobile market
Report: Telecom Italia preparing €7B bid for Vivendi's GVT
Telecom Italia confirms interest in Vivendi unit GVT

Article updated Aug. 29 at 12 p.m. CET to add in Telecom Italia's response to Vivendi's decision.