Telefonica buys Portugal Telecom Shares in Vivo

Telefonica agreed to the acquisition of the shares of Portugal Telecom in Vivo Participacoes, the largest mobile phone company in Brazil at the price over 7.5 billion Euros (9.8 billion dollars). As announced today, the Spanish company will initially pay 4.5 billion in cash and one billion by the end of the year the remainder will be settled in 2011. The two companies jointly own Vivo through an investment vehicle under the name Brasilcel, which controls 60% of the Brazilian company. Last month, Telefonica had announced that it abandons its plans to acquire control of the leading mobile phone company in Brazil, as the negotiations with Portugal Telecom were unsuccessful.

In its Communication, the Spanish telecommunications company said that it was withdrawing its bid for shares worth 7.15 billion Euros in Vivo for the period for which it had given the board of the Portuguese company for its acceptance. Although Portugal Telecoms shareholders had voted in favor of accepting the offer, the Portuguese government blocked the agreement by invoking rights under the regime of so-called “golden” shares. The European Court ruled the rule illegal by referring to it as an unwarranted restriction on free movement of capital.