Cade, Brazil’s competition watchdog, granted Telefonica Brasil conditional approval to buy broadband provider GVT, which was quickly followed by an announcement from parent company Telefonica Group that it will sell new shares to existing shareholders in order to raise €3 billion ($3.3 billion) to help fund the $7.8 billion cash and stock deal.

A combination of Telefonica’s Vivo, the largest mobile operator in Brazil, and GVT – which passes over 10.4 million homes and supports over 2.5 million broadband customers – puts Telefonica in a strong position to develop quad-play bundles.

Cade said the GVT takeover was dependent on certain conditions being met. These include parent company Telefonica giving up its minority stake in Telecom Italia, which majority-owns TIM, Brazil’s second-largest mobile operator and Vivo rival.

Another condition is that Telefonica Brasil and GVT must maintain the reach and quality of their combined services. Neither can exit a city in which they operate for at least three years.

According to sources quoted by Reuters, Telefonica Brasil will later today announce plans for a rights issue with the aim of raising $4 billion in fresh capital. Parent company Telefonica will reportedly buy $2.8 billion of the rights issue, with the rest placed with investors.

Pricing of the issue is planned for 16 April, according to one Reuters source, adding that Telefonica Brasil hired as many as 14 banks to handle the transaction.

Telefonica Brasil said last week it would hold a public share offering to buy Vivendi-owned GVT.

Cade’s green light follows last month’s authorisation by Brazil’s telecoms regulator Anatel on the cash component of the GVT acquisition, and the approval given this month to the proposed exchange of shares in the transaction.

As part of the agreement struck between Vivendi and Telefonica Group last September, Vivendi gets a cash consideration of €4.66 billion and a 7.4 per cent stake in Telefonica Brasil.

Boardroom changes
Now that Telefonica Group is fully authorised to start the integration process of both Telefonica Brasil and GVT, the Spanish parent company has proposed to Telefonica Brazil’s board of directors that Amos Genish, current CEO of GVT, be appointed as its new chief executive.

Antonio Carlos Valente, current chairman of Telefónica Brasil, is to remain non-executive chairman of Telefonica Brazil’s board. In the near future, said Telefonica in a statement, Valente will also assume “new responsibilities” as representative of the Group in Latin America.

The statement also said that Paulo Cesar Teixeira, current CEO of Vivo, has “taken the decision to explore other professional projects outside of the Telefonica Group after playing a highly relevant role over the last few years to position Vivo as one the leading operators of the Brazilian market”.