Telefónica has inked a deal to buy Brazil’s GVT for roughly $9 billion. GVT’s current owner, France’s Vivendi SA, fielded competing bids from Telefónica and Telecom Italia. GVT offers fixed telephony, broadband and pay-TV services.
The final purchase price is lower than expected; Telefónica reportedly was ready to pay $9.8 billion last month. That bid came after Telecom Italia bid roughly $9 billion.
Ironically, Vivendi SA will end up owning part of Telecom Italia as part of the deal announced today. Telefónica is paying just under $6 billion in cash, and is funding the rest of the purchase with its own shares and those of Telecom Italia. Telefónica currently owns 5.7% of Telecom Italia and will transfer those holdings to Vivendi SA.
Vivendi SA appears to be interested in expanding in Italy. The company is reportedly looking at a purchase of a stake in pay TV provider Mediaset SpA.
Combining pay TV with wireless offerings is also of interest to operators in the Brazilian market. Telecom Italia owns TIM Brazil, and had hoped to combine that wireless business with GVT’s fixed line service and pay TV offerings.
The four biggest mobile operators in Brazil are Vivo, Claro, TIM and Oi. Oi is reportedly interested in purchasing TIM. A combination of TIM and Oi would clearly consolidate the market, and would leave Telecom Italia without a horse in the race for Brazil’s millions of mobile subscribers.
Macquarie Capital’s Kevin Smithen has said in a statement that his firm thinks Telefónica could bid for TIM Brasil.
“Telefónica Brasil retains its financial flexibility for further Brazilian consolidation, especially in the wireless space,” Smithen said. “We believe that while Telefónica will be highly levered, it could still participate in a club bid for TIM Brasil if Telecom Italia is a seller and if Oi is able to raise capital to fund its portion of a deal.”
