Telefonica signed a €7.2 billion cash and stock deal with Vivendi to acquire GVT, the French conglomerate’s broadband business in Brazil, which also sees the Spanish and Latin American giant relinquish its shares in Telecom Italia.
Assuming the deal gets regulatory approval, which the two companies expect before June 2015, Telefonica will merge GVT with its Vivo subsidiary – the largest mobile operator in Brazil – to create Telefonica Brasil.
By adding GVT’s fixed network, which passes over 10.4 million homes and supports over 2.5 million broadband customers, Telefonica is in a position to develop quadplay bundles.
Telefonica Brasil will be the country’s biggest telecoms group. The operator reckons GVT integration will generate synergies of at least €4.7 billion.
As part of the agreement, struck after nearly a month of exclusive negotiations between the two firms, Vivendi gets a cash consideration of €4.66 billion and a 7.4 per cent stake in Telefonica Brasil, worth €2.02 billion as of 18 September.
Of the €4.66 billion cash, a bank debt of around €450 million and adjustments in working capital are to be deducted. The cash payment, says Telefonica, will be financed via a capital increase at Telefonica Brasil, to which Telefonica Group will subscribe.
No doubt to placate Cade, Brazil’s anti-trust watchdog, the deal involves Telefonica giving up its remaining 5.7 per cent stake in Telecom Italia (valued at €1.01 billion as of 18 September), which represents 8.3 per cent of the Italian incumbent’s voting capital.
Telefonica has been under growing pressure to loosen its grip on Brazil’s mobile market, where its stake in Telecom Italia gave it an indirect interest in TIM, the country’s second-largest mobile operator, which is majority-owned by the Italian incumbent
Telecom Italia also had its eyes on GVT to shore up falling voice revenue at TIM, but since Vivendi entered into exclusive talks with Telefonica about its broadband unit, the Italian incumbent has turned its attention elsewhere.
According to a recent Bloomberg report, Telecom Italia is weighing up a bid for Oi, a major fixed-line player in the country and Brazil’s fourth-largest mobile operator.