Vivo shares soar on Telefonica accord to buy control

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Shares in Vivo, Brazil's biggest cellphone network, soared more than 10 percent Wednesday after Spain's Telefonica won agreement to buy control of the company for 9.7 billion dollars (7.5 billion euros).

The price for ordinary Vivo shares jumped 10.78 percent, at 108 reais (61 dollars, 47 euros), on Sao Paulo's stockmarket on news that Telefonica had reached an agreement in principle to buy Portugal Telecom's stake in Vivo.

The deal was submitted to the boards of the European companies on Wednesday, Telefonica said in a statement.

Telefonica and Portugal Telecom jointly own Vivo via investment vehicle Brasilcel, which holds 60 percent of the company.

Portugal Telecom said in a separate statement it had approved the sale of its stake in Vivo to Telefonica and concluded a "strategic partnership" with Oi, another Brazilian phone company.

Under the deal, Portugal Telecom will acquire a 22.38 percent stake in Oi for a maximum investment of 4.8 billion dollars.

Both Telefonica and Portugal Telecom see fast-growing Brazil as a key market as they face stagnant growth in their domestic markets.

Vivo is the biggest operator, with a 30 percent market share in the South American country. Oi is the fourth-biggest operator, with 20 percent, behind rival companies Claro and Tim.

Vivo announced Wednesday, after news of the upped bid, that it made a profit of 241 million dollars (185 million euros) in the first half of this year, a 36 percent jump over the same period in 2009.

Telefonica's initial offer of 7.4 billion dollars for Portugal's stake in Vivo was rejected by Portugal Telecom's board in May.

Telefonica raised the offer to 8.4 billion dollars and then to 9.3 billion dollars last month.

The overwhelming majority of Portugal Telecom shareholders, 74 percent, voted to accept that offer but the Portugal's socialist government used its "golden share" in Portugal Telecom to block the sale.

Earlier this month, Portuguese Prime Minister Jose Socrates defended his government's move, saying in a newspaper interview that "it did what it had to do to defend the strategic interests of Portugal and Brazil."

Portuguese media reported that Lisbon accepted Telefonica's latest offer of 9.7 billion dollars because the amount allowed Portugal Telecom to comfortably buy a stake in Oi and thereby remain in the Brazilian market.

Portugal Telecom is one of the country's largest firms and analysts had said that if it were to leave the Brazilian market, it would shrink considerably, leaving it open to a takeover by another operator.

Shares in Oi dropped 15.99 percent to 35 reais (20 dollars, 15 euros).

Brazilian President Luiz Inacio Lula da Silva said Oi, which is the only cell network operator controlled by Brazilian interests, would remain in Brazilian hands.

"One thing I guarantee as long as I am president is that this company will continue to be a national company. That's what it was created for," said Lula, who is to step down at the end of this year after serving the maximum allowed two terms.

He said Portugal Telecom's 22.38 percent stake in Oi could be "a good deal for Brazil, as long as control remains national."

© 2010 AFP

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