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March 4, 2007 11:25 pm

PT ready to battle Telefónica for Vivo

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Portugal Telecom could clash with Spain’s Telefónica over control of Vivo, Brazil’s largest mobile operator, after successfully defeating a €11.6bn ($15.3bn) hostile takeover bid by Sonaecom, a smaller Portuguese competitor.

A battle for Vivo is one of several potential repercussions of the collapse of Sonaecom’s bid, which put other strategic plans by Portuguese telecommunications groups on hold for almost 14 months. “I want to correct the idea that Telefónica is the natural buyer for Vivo,” said Henrique Granadeiro, PT’s chairman and chief executive.

PT also had the capacity to control Vivo, he said, especially considering that “they speak Portuguese in Brazil, not Spanish”.

He was speaking after PT shareholders on Friday rejected a Sonaecom proposal to abolish a company statute limiting the voting rights of any single shareholder to 10 per cent.

Lifting the voting restriction was an essential condition for Sonaecom’s bid, launched in February 2006, to succeed.

PT and Telefónica jointly control Vivo, Latin America’s biggest mobile operator, through a 63 per cent holding owned on a 50:50 basis. Sonaecom had indicated it was willing to sell PT’s Vivo stake to Telefónica if its bid was successful.

Telefónica was also understood to be confident of buying PT’s holding, with the approval of the current PT board, if the Sonaecom bid failed.

But Mr Granadeiro gave a clear indication that PT aimed either to maintain its stake in Vivo or seek control of the company itself. Brazil and Africa were the two main areas where PT planned to build its international operations, he said.

Telefónica, PT’s biggest shareholder with just under 10 per cent, voted in favour of Sonaecom’s proposal to lift PT’s voting restrictions. Mr Granadeiro described the decision as a “strategic misalignment” with the PT board, saying that Telefónica would have to reflect on the consequences for its partnership with PT.

“I don’t want to make a proposal without being certain that the bride wants to marry,” he said.

PT has also made a commitment, under government pressure, to separate ownership of its fixed-line and cable networks and to spin off PT Multimedia, its cable television and media content division, this year.

Sonaecom, Portugal’s second-largest telecommunications group, could be among several candidates expected to contend for PTM.

Sonaecom, which won approval from Portugal’s competition regulator for a proposed merger of its mobile operations with PT’s mobile division, has also said it may consider the possibility of a partnership with Vodafone’s Portuguese operations.

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