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Spanish telecom major Telefonica finally takes control of Brazilian firm Vivo from Portugal Telecom

In a twist of harrowing but successful turn around, Telefonica Wednesday announced it had finally managed to seal the deal with Portugal Telecom for the acquisition of the Portuguese Telecoms company’s stake in Vivo, the Brazilian telecoms major. In its statement to the Spanish Stock Exchange, the Spanish telecoms giant, Telefonica, said it had won full control of the mobile phone joint venture it had entered with Portugal Telecom in the Brazilian firm, Vivo, after raising its offer for the thrid time.

Telefonica’s bid had met a stumbling block in the form of the portuguese government that was initially oppossed to the deal. The Portuguese government, Portugal Telecom’s majority shareholder had used its golden share veto to block the acquisition arguing that its presence in Brazil was necessary, even after Telefonica had raised its bid for the second time.

However, the Spanish telecoms major said it had overcome government oppossition by raising its offer for the third time to a staggering €7.5 billion. The deal is now pegged at about 9.8 billion US dollars and ends the protracted altercation between the two companies that both view Brazil as a replacement for bolstering their sales and sluggish domestic growth in their home countries given Brazil’s fast growing mobile phone market.

The deal sees Telefonica’s bid increase by one third from what it had initially offered back in May for the Portuguese firm’s 50% stake in Vivo. The Portuguese government had rejected an increased offer of €7.15 billion, superseding the company’s shareholders that had approved the deal by about 70% majority.

Even after the European Court of Justice had intervend and declared the move by the Portuguese Government illegal, it did not deter the Portuguese government from standing in the way of the deal. Analysts were upbeat that the completion of the deal comes as a relief to the investors of the two telecoms giant. After announcing that it was pulling out of the talks for the deal, the Spanish firm had threatened to institute a legal battle for the Vivo takeover, a process that would have taken a prolonged period.

Investors can thus spare a sigh of relief as the culmination of the whole tussle has been a happy ending, said pundits. On its part, reports emerged in Portugal’s media that the Portuguese telecoms firm was keen on spending the funds it accrued from the sale on the purchase of a 21% stake in Oi, another Brazilian phone major for about €3.71 billion.

29 July 2010.