Telecom Italia bids USD9.4 billion for GVT

Jose Castro – Fourth Estate Cooperative Contributor

Rio De Janeiro, Brazil (4E) – A race is now in the works to acquire the Brazilian broadband unit Global Village Telecom, currently owned by France’s Vivendi SA. The bids are between Telecom Italia SpA and Telefonica SA, with the former drafting a USD9.4 billion offer, according to people with knowledge of the ongoings.

Part of the deal would be Vivendi receiving 20% in Telecom Italia as well as a stake in the new firm that would come with the merger of the Brazilian units. The information was confirmed by sources who sought anonymity because the said bid was not yet made public.

For its part, Telefonica offered EUR6.7 billion for GVT presented in early August.

GVT’s main business is providing internet access to the market. In acquiring the company, both Telecom Italia and Telefonica would increase its presence in the country. It is a new area for revenues for either firm, as revenue has been dropping in both Spain and Italy.

Vivendi for its part said that as of Aug 16, it had received no offer and for that there is no comment on the matter. Both GVT as well as Telecom Italia declined to make a comment on the matter nor respond to emails sent to them seeking a response.

GVT has engaged the services of financial advisers Goldman Sachs Group Inc and Credit Suisse Group AG for the sale.

The Telecom Italia bid was explained by its CEO Marco Patuano when he met with Vivendi Chairman of the Supervisory Board Vincent Bollore last Wednesday. The proposed purchase, which was worked together with Mediobanca SpA of Italy, Banco Bradesco SA of Brazil and Citigroup Inc. The offer would include the merger of both Vivendi’s and Telecom Italia’s Brazil units. Also included in the deal would be Telecom Italia distributing Vivendi’s media content in both Brazil and Italy.

Anatel, the telecommunications regulatory authority in Brazil, has been quite strict on mergers in this market. According to a press official of the regulator, who sought anonymity, it is often required that a major analysis of the merger be done or even a modification of the company structure be recommended before any deal would be approved. Another government entity, the anti trust regulator of Brazil known as Cade, responded via email saying it would review the case upon receipt of notice of a deal. This was echoed by Brazilian Communications Minister Paulo Bernardo, who told reporters that the preference of the current government is for more companies participate in the market instead of having a few controlling the market.

Just last week, Telecom Italia also announced the results of its first half domestic revenues, which is 2/3 of its overall revenue. It stated that domestic revenues fell by 8% while its overall revenues fell by 11%, to just EUR10.5 billion, from its previous revenues in the same period for 2013.

In the world stock market, Telecom Italia fell 1.6% to close at EUR0.81 per share on the Milan bourse last Aug.14. Vivendi, listed in the Paris Index, also fell 0.5% to EUR19.19 last Aug. 19 closing.

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