Telefónica / Portugal Telecom
Negotiating a divorce is even harder when the mother-in-law takes a seat at the table. The Portuguese government last month blocked Telefónica’s €7.2bn offer to buy Portugal Telecom out of Vivo, their joint mobile venture in Brazil. Now the Spaniards have ended attempts to revive the offer – they are (not unreasonably) tired of negotiating with shareholders and Portuguese politicians at the same time. Lisbon says it is acting in PT’s best interests; in fact it has damaged the company while doing Telefónica a favour.
Not that the deal is necessarily dead. Lisbon remains meddlesome by insisting that PT stay in Brazil: it could buy into a different Brazilian operator (probably Oi) and then take Telefónica’s money. But Oi’s ownership structure is complicated and if PT is to avoid a shareholder revolt it must secure more than a minority stake. Buying in Brazil would also be expensive: Telefónica’s offer, which valued Vivo at about 10 times expected earnings before interest, tax, depreciation and amortisation, has had the effect of inflating everyone else’s expectations. Telecom Italia, for example, would be unlikely to accept less than €13bn for its Brazilian mobile operator, Tim Brasil. The worst-case scenario for PT, meanwhile, would see Telefónica take the case successfully to arbitration court in The Hague, dissolve the joint venture and seize control on the cheap.
Indeed, Telefónica might have had a lucky escape. It would have struggled to make a return on the inflated price it offered for Vivo, especially as regulators will soon cut the rates mobile operators in Brazil charge each other to connect calls. That will erode revenues. The market has it right: since Lisbon waded in to protect Portuguese interests, Telefónica’s shares have risen 8 per cent, while PT’s have dropped 3.5 per cent. With friends like these …
Fonte: Financial Times