Spanish Giant Telefonica Expanding Operations in Brazil

Spanish Giant Telefonica Expanding Operations in Brazil

In the view to expand its operations in Brazil and to deal with the antitrust concerns, Spanish giant Telefonica has launched a EUR6.7 billion bid for Vivendi's Brazilian telecoms business Global Village Telecom (GVT).

The offer states that the French media group would receive BRL11.96 billion (USD5.3 billion) in cash along with shares in Telefonica's Brazilian unit. Telefonica said it has offered $5.3 billion in cash and 12% of the share capital in the new company. Also, rights will be granted to purchase roughly 8% stake in Telecom Italia (TI) from the Madrid-based operator.

Back in December, the Spanish group faced a regulatory ruling in Brazil. This ruling largely questioned the role of the company as a shareholder in TI, which owns Brazil's second largest carrier TIM Participacoes. So, this EUR6.7 billion bid is an initiative by Telefonica to reduce its influence in Italy and simultaneously strengthen its Brazilian fixed line business through this tie-up with GVT.

On Tuesday, a statement released by Telefonica stated that the company planned to combine GVT with Telefonica Brasil, so as to come out as the biggest telecom operator in Latin America's largest market.

This latest strategy of Telefonica has been opposed by TI. Its CEO Marco Patuano reportedly favors expanding TIM Brasil through its own merger with GVT.

An unnamed source has revealed that the French conglomerate is expected to hire the investment banking divisions of Rothschild and Deutsche Bank act as advisers in the deal.

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