Spanish telecommunications giant Telefonica has sweetened its bid for Portugal Telecom's indirect stake in Vivo Participacoes to Ôé¼6.5 billion, up from its previous offer of Ôé¼5.7 billion.
The new proposal comes with two alternatives: one for an immediate sale of Portugal TelecomÔÇÖs entire stake; the other to be executed at the Portuguese companyÔÇÖs sole discretion during a three-year period.
Portugal Telecom rejected TelefonicaÔÇÖs previous bid for its stake in Brasilcel, a holding company that owns about 60 per cent of the Brazilian cellphone operator Vivo.
At the end of March, Brasilcel had 30 per cent of BrazilÔÇÖs 179 million wireless subscriptions.
TelefonicaÔÇÖs offer is in line with its strategy to offset slowing growth in Europe by making acquisitions in Latin America, where Brazil is the biggest mobile phone market with a predicted growth in subscriber numbers of 11 per cent this year to 193 million subscribers.
Telefonica, which is headquartered in Madrid, is expected to enter a battle with Portugal Telecom for the lead in the Latin American market, where the Spanish company has spent more than $50 billion since the 1990s.
Portugal TelecomÔÇÖs Brazilian sales increased 4.1 per cent to Ôé¼3.23 billion last year, while its revenue from the domestic market declined 1.9 per cent.
Analysts have previously suggested that an offer of around Ôé¼8 billion might be enough to persuade Portugal TelecomÔÇÖs investors to push for a sale. However, some industry experts are saying that an offer of anywhere between Ôé¼6.2 billion to Ôé¼7.5 billion may be too good for Portugal Telecom to turn down.
Portugal Telecom is said to be sceptical about a merger between Vivo and Telesp, Telefonica's under-performing Brazilian fixed-line phone business, which the Spanish group wants to merge with Vivo.
If unsuccessful in its bid, it is likely that Telefonica could seek other acquisitions in BrazilÔÇÖs mobile market such as TIM Participacoes, which is the third-largest wireless carrier behind Vivo and America Movil.
The Spanish company lost out to FranceÔÇÖs Vivendi in a takeover battle last year for the landline phone company GVT; however, it does control Telecomunicacoes de Sao Paulo, which offers home phone and internet services in the state of Sao Paulo. Analysts have suggested that combining the operations of that company with Vivo could save Ôé¼3 billion a year in costs.
TelefonicaÔÇÖs offer follows America MovilÔÇÖs plan earlier this year to acquire Telmex Internacional for $24.5 billion (approximately Ôé¼19.2 billion), to combine its wireless and landline operations in Brazil.
