War over Vivo set to enter crucial phase

The battle for control of leading Brazilian mobile operator by subscribers Vivo Participacoes is expected to reach new levels this week when Portugal Telecom (PT) shareholders vote on Telefonica of Spain’s unsolicited EUR6.5 billion (USD8.0 billion) to buy out its 50% stake in the joint venture. No one is certain of the outcome of the vote, although both sides consider the outcome to be of immense importance, given the Latin unit’s status as a massive cash cow for both groups. Telefonica is looking to merge Vivo with its Brazilian fixed line arm Telesp if it is successful in its bid. The Spaniards are coming under increasing pressure in the market and consider a tie-up as key to developing synergies and maximising the opportunities from cross-marketing. However, should PT sell off its Vivo asset, it is effectively saying goodbye to its only significant cash generator in the region.