The Portugese government yesterday blocked Telefónica’s sweetened EUR7.15 billion offer to buy Portugal Telecom (PT) out of Vivo, their Brazilian mobile phone joint venture. The government used its ‘500 golden shares’ in PT to block an overwhelming vote (74 percent majority) by PT shareholders that supported the buyout. “The state will use all the instruments at its disposal to defend what it believes to be the best interests of Portugal Telecom and the country,” José Sócrates, Portugal’s prime minister, told the Financial Times. Reuters notes that Telefonica has said it is ready to fight the issue in court. Indeed, the European Court of Justice is expected to rule on July 8 on the legality of the golden share. PT’s board is reported to be seeking legal advice on the government’s move. Meanwhile Telefonica yesterday said it had extended the acceptance period for its Vivo offer to July 16, a move aimed at allowing for a change of heart after the July 8 decision.

Telefonica’s desire to take control of Vivo is understood to be part of a drive to more closely integrate Vivo with its underperforming Brazilian fixed-line arm, Telesp. Telefonica and Portugal Telecom jointly own Brasilcel, a holding company with a controlling 60 percent stake in Vivo.