It was rumored on Friday that the French group Vivendi is considering selling its Brazilian telecom unit, GVT. The news service Reuters cited sources familiar with the issue, and noted that the sale could help Vivendi’s falling shares recover. A sale of GVT could be worth up to U.S.$10.42 billion (€8.5 billion).
In Brazil, GVT declined to comment, and Vivendi did not respond to RCR Wireless News’ interview requests. The French office of Vivendi said the company does not comment on rumors.
Vivendi bought GVT in 2009 after almost two months of bidding head-to-head with Telefónica. The question many industry observers are asking is: if GVT is on sale, would the Brazilian unit of Telefónica return to its plan to purchase it? Or would it make more sense for América Móvil to buy GVT?
“GVT was very strategic for Telefónica at that time. Its operations were concentrated in São Paulo, and the acquisition of GVT would have been an opportunity to expand fixed telephony and broadband across the country,” said Marceli Passoni, Informa Telecoms & Media’s research analyst for Latin America.
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Vivendi’s bid had valued GVT at U.S.$ 4.8 billion (R$7.2 billion). Vivendi acquired 37.9% of GVT’s voting shares for R$56 each in November, and then in January 2010, Vivendi bought 13.22% more GVT shares, reaching a total of 98.92% of the Brazilian company. With this last move, Vivendi closed GVT’s capital.
As the company announced at the time, the move into Brazil fit with Vivendi’s chief executive Jean-Bernard Lévy’s strategy to seek growth in emerging markets.
GVT and the videogame giant Activision have been the major drivers of Vivendi’s growth in recent years. Now, Vivendi faces approximately U.S. $16.95 billion (€14 billion) in debt and high shareholder expectations for restructuring to unlock value. According to The Wall Street Journal, Goldman Sachs Group Inc. and Barclays are helping the Paris-based Vivendi assess its options around Activision Blizzard, which has a market capitalization of about $13.4 billion.
Passoni pointed out that the market has changed significantly since Telefónica tried to acquire GVT in 2009. The chaotic Spanish economy would make it challenging for Telefónica to get the approval and money necessary to acquire the company. In addition, Telefónica has merged its fixed and mobile assets under the brand Vivo.
As for Carlos Slim’s América Móvil, GVT could enhance its NET and Embratel operations. “For América Móvil, the acquisition of GVT would put its operator NET in a strong position in the market,” Passoni said. “However, this is not América Móvil’s typical strategy, as the operator generally buys companies with bad assets, which is not the case with GVT.”
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