Vivendi said it will enter exclusive negotiations with Telefonica over the sale of its Brazilian fixed-line arm GVT, favouring the Spanish company’s bid over an offer made by Telecom Italia.
The French company said that Telefonica’s offer is “particularly attractive”, generating a capital gain of €3 billion. Other conditions of the deal, “limiting to a strict minimum the risk of executing the operation as well as Vivendi’s commitments after the sale”, were said to be “totally in line” with its objectives.
In a statement, Vivendi emphasised “the relevance and quality of the Telecom Italia offer”.
TI subsequently said that it “continues to pursue its development and investment plans in the country in line with the group’s 2014-2016 business plan, leveraging on TIM Brasil’s strong position in the market”.
The Telefonica deal gives GVT an enterprise value of €7.45 billion, and the transaction includes €4.66 billion in cash as well as 12 per cent of Telefonica Brazil’s shares, of which about one third can be exchanged for a 5.7 per cent economic stake in Telecom Italia currently held by the Spanish company.
According to The Wall Street Journal, Telefonica expects to complete the deal by “mid-2015”. It also expects the combination of its own Brazil operation with GVT to generate €4.7 billion in synergies, through lower operating and network costs, as well as tax savings and lower financial costs.
Telecom Italia had given GVT an enterprise value of €7 billion, with €1.7 billion in cash, a 15 per cent stake in TIM Basil, and 16 per cent economic stake in TI. This offer also had an exit clause in case of a significant drop in value of GVT.
Viviendi said the Telefonica partnership also allows for “the development of joint projects in content and media”. While it is focused on its media business, it also said that its strategy “does not preclude the group from taking minority positions in allied companies to distribute content”.
Vivendi also revealed first half figures for SFR – the sale of which is still pending – and GVT.
For the French integrated operator, EBITDA of €1.3 billion was down 11.4 per cent year-on-year, on revenue of €4.91 billion, down 4.7 per cent on a comparable basis.
Putting a positive spin on the difficult French market, it said that “the decline in revenue has decelerated”, from negative 5.8 per cent in Q1 to negative 3.5 per cent in Q2.
The company’s mobile customer base increased by 2 per cent year-on-year, to stand at 21.4 million.
The disposal of SFR to Numericable is expected to close “within the next months”.
EBITDA at GVT was €170 million, down 13.2 per cent, on revenue of €839 million, down 5.1 per cent.
The company actually saw increases in both EBITDA and revenue at constant currency, driven by a “continued growth of the core segment (retail and SME)”.