The Portuguese government has given severe opposition to the Spanish telecommunication company to start its operations in Brazil. A Spanish telecommunications compny, Telefónica has won the bid by raising it for the third time to 7.5 billion Euros. The deal has been announced in the Spanish Stock market by the company worth of $9.8 billion finally.
Background to the taking over
There had been a continuous tussle between two of the European telecommunications operators who were striving their best to get the best out of the growing mobile market in the Brazil. They were both generating great revenue out of the country and were making their sluggish performance in the home countries balanced through this. Telefónica will be paying one third more compared to the first offered price back in May this year for the 50% stake of Vivo that is one of the leading operators in Brazil.
The government previously refused the 7.15 billion Euro offer from the same company as it was quite determined to give the royalty to Portugal Telecom as it was the right choice to be given the opportunity to develop in the Portugal Telecom. The company was lucky enough to get the deal done in the price stated.
The sale is well opposed by Portuguese government in the European Union’s highest court that was condemned by officials from all around the European Union to be an evidence of protectionism and violation of the free movement of capital. The agreement on Wednesday last week with the finalization of the deal is certainly the appropriate result and has relieved investors on both side of the deals. There were even expectations of some legal proceedings from the side of the Spanish operators in the European Union courts,
The company is said to have paid more than the expectations that they might have set up with the deals but this is still positive news for them to acquire Vivo at the end which gives them a major role in the country of Brazil where they can easily get revenues out of the increasing mobile industry. Portugal Telecom is making another move at the same time where they are planning to but the Brazilian wirelass operator, Telemar Norte Leste that is also known as Oi. The security filings reported that the company is willing to pay $4.8 billion for shares equal to 22.4% of the total company worth. The services that Oi has been providing include Internet Access, Mobile, Fixed Line, and pay television services already.
Telemar on the other hand plans to acquire 10% of the shares of Portugal Telecom just to replace Telefónica as the Portuguese company’s biggest investor. Oi already has around 20.1% shares of the Brazilian wireless market back in June while Vivo had 30.2% shares back then. This was reported by the Brazilian Telecommunication regulator.
The number of clients in Brazil increased by 20 percent through Vivo and their services that gave them a revenue of some 56 million and the net income rose by 30% to 235 million Reals or $134 million.