Telefónica aims for full control of Vivo

Telefónica of Spain on Wednesday signalled its determination to secure exclusive control of Vivo, Brazil’s largest mobile operator.

After finalising sales of two unwanted assets in the past month for €5.5bn ($7.4bn), Telefónica said it would like “very much” to own 100 per cent of Vivo, which is a joint venture with Portugal Telecom.

Telefónica on Wednesday reported revenue of €13.8bn for the three months to March 31, up 8 per cent on an organic basis, and operating profit before depreciation and amortisation of €5.1bn, up 6 per cent. Net income was €1.3bn in the first quarter.

But the telecoms group’s solid results in Spain and Latin America were marred by deteriorating performances by some of its 02 mobile businesses.

02 Germany generated revenue of €843m in the first quarter, down 3 per cent year on year, and adjusted operating profit of €161m, a decline of 6 per cent.

Telefónica regards securing exclusive control of Vivo in Brazil as its most important potential deal in 2007, say people familiar with the situation.

Vivo is the country’s leading mobile operator, but has been losing ground to rivals in what is the world’s fifth largest wireless market.

Santiago Fernandez Valbuena, Telefónica’s chief financial officer, said the group believed Vivo could be managed better with one owner, but added any deal with Portugal Telecom would have to be at the “right price”. Bankers say Telefónica could have to pay €3bn for Portugal Telecom’s Vivo stake.

Mr Valbuena also stressed Telefónica’s commitment to spend no more than €1.5bn on acquisitions during 2007, net of disposals.

This week Telefónica also agreed to sell Endemol, a European television production company, for €2.6bn.