Telefonica sweetens bid for Vivo to $7.9 billion

Spanish telecommunications provider Telefonica has sweetened its bid for Portugal Telecom's indirect stake in their 50:50 Brazilian mobile joint venture Vivo Participacoes from $6.9 billion to $7.9 billion.

In May, the Madrid-based Telefonica, which provides its services in Europe and Latin America, is the world's third-largest mobile service provider behind China Mobile and Vodafone had offered to buy Portugal Telecom's 50 per cent stake in Vivo for $6.9 billion, which was instantly rejected by Portugal Telecom.

Telefonica, which is also Portugal Telecom's largest shareholder, has now offered two alternatives, in the first case, Portugal Telecom would sell its entire stake, while in the second case- Portugal Telecom could at its own discretion sell the stake at an agreed three-year period.

Telefonica, which had 2009 revenues of 56.73 billion euros said that its offer is valid until 30 June 2010, but may extend this period if Portugal Telecom's board submits the offer to a shareholders' meeting.

Sao Paulo-based Vivo is Brazil's largest mobile service provider with 15.7 million subscribers as of 31 December 2009. It generated $9.4 billion in revenues for 2009 and made a net profit of $492 million.

Although Telefonica's offer represents a premium of 130 per cent, but Portugal Telecom has said in the past that it will not sell its stake. Telefonica, which holds a 10 per cent stake in Portugal Telecom has threatened to launch a bid for Portugal Telecom itself if it does sell its stake in Vivo.

In a regulatory filing yesterday, the Spanish operator said, Telefonica does not discard, in the present circumstances, any possible alternative, including'' an offer for Portugal Telecom.''

Telefonica's land line business is not doing well as is desperate to merge it with Vivo's fixed line operations, which will bring in about $3.5 billion in synergies.