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Telecom Italia confirms GVT bid as Telefonica raises the stakes

Telecom Italia has entered the bidding for Brazilian fixed provider GVT, making an offer of around €7 billion. This was swiftly countered by rival Telefonica submitting a €7.45 billion bid for the operator.

TI’s bid follows lengthy speculation, and its offer includes €1.7 billion in cash as well as 16% of its share capital, which grants 21.7% of voting rights. In addition, the offer would provide a 15% stake in TI’s Brazilian unit, TIM Brasil. The deal would initially see TIM assuming a minority holding in GVT before merging with it.

Telefonica meanwhile has upped its original €6.7 billion bid, which was made earlier this month. Compared to TI, it has offered significantly more cash (€4.66 billion), but a lower stake (12%) in its Brazilian subsidiary Telefonica Brasil (branded as Vivo). If it accepts, Vivendi may choose to exchange a third of these shares for 5.7% of share capital and 8.3% of voting rights in TI.

The offer expires tomorrow - just 24 hours after it was first made – as it does not require shareholder approval. TI’s bid meanwhile needs to be ratified and expires on September 20th. Both firms have proposed content partnerships as part of their offer.

Telefonica’s bid, which it will fund via a capital increase in Telefonica Brasil, is believed to be part of its attempt to comply with instructions from antitrust regulator Cade. The watchdog has stated that the operator must either divest its stake in TI (and therefore its interest in TIM) or find an operating partner for Vivo.

The bidding for GVT will be complicated by Oi’s recent announcement that it intends to bid for a majority holding in TIM. Oi’s bid is likely motivated by TI and Telefonica attempting to bolster their footprints in Brazil with the acquisition of GVT.

In addition, it has been suggested that Vodafone could be interested in acquiring TIM, as the British group is reportedly interested in entering the Brazilian market.

 

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