Telefonica has closed its deal with Vivendi to acquire its Brazilian broadband unit GVT.
The €7.2 billion cash and stock deal also sees Telefonica divesting its shares in Telecom Italia, and by extension its interest in TI subsidiary TIM Participacoes. This brings it in line with orders from Brazilian antitrust regulator Cade.
Once the deal is approved by the regulator, the Telefonica plans to merge its market-leading Vivo unit with GVT to form Telefonica Brazil, which would be the largest telecoms group in Brazil. The addition of GVT’s fixed network will allow Telefonica to offer quadplay bundles featuring broadband services.
Telefonica believes that the deal will generate synergies of at least €4.7 billion. As part of the deal, Vivendi is receiving a cash consideration of €4.66 billion – with a bank debt of around €450 million deducted - as well as a 7.4% stake in Telefonica Brasil, with a stock market value of €2.02 billion.
Cade has been pressuring Telefonica to decrease its dominance in Brazil. To this end, the watchdog had ordered the operator to either find an operating partner for its Vivo subsidiary or to divest its indirect interest in TIM Brasil. Telefonica has now accomplished the latter by surrendering its 5.7% stake in Telecom Italia (valued at €1.01bn). The holding represents 8.3% of TI’s voting rights.
The Telefonica deal requires the approval of Cade as well as that of the Brazilian regulator Anatel.