Telefonica offers to pay $8.9 bn for GVT

Spanish telecommunications company Telefónica today said that it had offered to pay $8.9 billion in cash and shares for Global Village Telecom (GVT), a Brazilian company controlled by Vivendi of France, The New York Times reported.

The deal would combine Telefónica's mobile and broadband operations in Brazil, operating under the Vivo brand, with GVT, creating the largest telecom provider in Brazil.

Telefonica said, the offer underlined its commitment to Brazil, a country where the group had been making strong investments to consolidate the growth of the telecommunication market.

The Madrid-based company had offered to pay 11.9 billion Brazilian real in cash, and shares equivalent to 12 per cent of the combined companies, for GVT. The total offer works out to the equivalent of 20.1 billion Brazilian real, or about $8.9 billion.

The deal, if accepted, is subject to regulatory approval, and Vivendi would have up to 3 September to consider the offer.

According to Telefónica, it was willing to offer Vivendi a stake worth up to 8.3 per cent in Telecom Italia as part of the deal.

The Spanish company had earlier announced that it planned to sell convertible bonds in Telecom Italia worth about €750 million, ($1 billion), to cut its stake in the Italian company to comply with the requirements of the Brazilian competition regulator.

Telecom Italia is one of the Spanish company's main rivals in Brazil.

Vivendi said in a release that ''none of its subsidiaries are for sale,'' but that it would consider the offer.

According to commentators, Telefonica was seeking to expand in a market where web access providers were seeing surging demand for video streaming even as sales dropped in Spain on increasing competition.

The company, Brazil's largest wireless provider, was also grappling with how to comply with December regulatory rulings that called its role as a shareholder of Telecom Italia, the owner of the No 2 mobile carrier in the country in question, Bloomberg reported.

Ralph Szynczak, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany said this was an absolutely sensible move from Telefonica, according to Bloomberg. He added, the company was trying to get out of Italy and would strengthen its Brazilian business through a merger with GVT.

Other companies interested in GVT could include Telecom Italia, whose chief executive officer Marco Patuano has been looking to expand its Tim Brasil unit through an eventual merger with GVT, people familiar with the plan said in May according to Bloomberg.