Feeds

Telefónica bids for Vivendi's Brazilian bits: Telecom Italia gasps

A Spanish firm, a French firm and an Italian firm all meet up in Brazil...

Internet Security Threat Report 2014

Spanish telecoms giant Telefonica’s unexpected €6.7bn bid to buy Brazilian broadband operator GVT, which is owned by French media conglomerate Vivendi, has put the cat among the pigeons across the Mediterranean at Telecom Italia, Italy’s largest telco.

Telefonica, which owns O2 in the UK, is already the largest mobile operator in Brazil and will be number one in fixed broadband as well if its bid for GVT succeeds.

Currently Telefonica has 4.37 million broadband customers, according to regulator Anatel, an 18.8 per cent share, while GVT has 2.76 million, or 11.8 per cent. A merger would put Telefonica at 7.13 million, or 30.6 per cent, ahead of the present number one, Oi, which is on 6.56 million or 28.2 per cent. Telefonica is actually offering 60 per cent of the bid price as cash and the rest as a 12 per cent stake in the projected Telefonica Brasil.

So why would Telecom Italia care?

The Italian telco is affected because Telefonica holds a 14.8 per cent stake in TI and is offering 8 per cent to Vivendi as part of the deal. This has led to speculation that Telefonica was seeking to exit from Telecom Italia completely at the time the latter is struggling, having just reported an 11 per cent slump in revenues to €10.6bn for the first half of 2014.

When news of the Telefonica bid for GVT broke, Telecom Italia’s share price plunged almost 5 per cent and trading was temporarily suspended.

Telefonica’s move could force Telecom Italia to act and even launch a counterbid for GVT. This is because, like Telefonica itself, Telecom Italia has been looking to Latin America and especially Brazil to make up for falling revenues at home at a time of deep recession.

TI's subsidiary there – TIM Brasil – is number two in mobile with 27 per cent of the market, just behind Telefonica’s Vivo, but much, much smaller in fixed broadband. It could be vulnerable to hostile takeover by an enlarged Telefonica, with both Oi and America Movil also quite likely to come in with bids if that happened. This would be a serious blow to Telecom Italia’s strategic plans for long term recovery. As it happens, TIM Brasil has been planning for broadband expansion through an agreement with Chinese telco equipment-maker ZTE to establish a joint laboratory for the development of next generation broadband technologies.

So Telecom Italia could be forced to act at a time not of its choosing in order to defend its Brazilian position. It would have to obtain a capital injection to fund the move, which would not be on favourable terms – given the operator’s rocky financial position.

Vivendi, meanwhile, has been neutral in its response, stating that none of its business units were for sale, but that it would consider Telefonica's offer in late August. There is another sub plot here since Vivendi has been seemingly looking to pull out of France’s broadband market by selling SFR to Altice, owner of French MSO Numericable.

However things are not quite that simple, since as part of that deal Vivendi will get 20 per cent of the new group created by the effective merger between Numericable and SFR, plus €13.5bn in cash. So Vivendi is continuing a strategy of having fingers in many pies.

Copyright © 2014, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

Internet Security Threat Report 2014

More from The Register

next story
Same old iPad? NO. The new 'soft SIMs' are BIG NEWS
AppleSIM 'ware to allow quick switch of carriers
Brits: Google, can you scrape 60k pages from web, pleeease
Hey, c'mon Choc Factory, it's our 'right to be forgotten'
Of COURSE Stephen Elop's to blame for Nokia woes, says author
'Google did have some unique propositions for Nokia'
FCC, Google cast eye over millimetre wireless
The smaller the wave, the bigger 5G's chances of success
It's even GRIMMER up North after MEGA SKY BROADBAND OUTAGE
By 'eck! Eccles cake production thrown into jeopardy
Mobile coverage on trains really is pants
You thought it was just *insert your provider here*, but now we have numbers
Don't mess with Texas ('cos it's getting Google Fiber and you're not)
A bit late, but company says 1Gbps Austin network almost ready to compete with AT&T
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Cloud and hybrid-cloud data protection for VMware
Learn how quick and easy it is to configure backups and perform restores for VMware environments.
Three 1TB solid state scorchers up for grabs
Big SSDs can be expensive but think big and think free because you could be the lucky winner of one of three 1TB Samsung SSD 840 EVO drives that we’re giving away worth over £300 apiece.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.