Telefonica could turn to courts as Vivo battle rumbles on

14 Jul 2010

The Financial Times reports that Telefonica of Spain will most likely seek arbitration in the international courts if efforts to resolve an ongoing dispute with Portugal Telecom (PT) vis a vis control of Brazilian mobile operator Vivo Participacoes is not resolved by Friday. The paper cites unnamed sources close to the company as confirming Spanish press reports from yesterday that a legal team is preparing its case for the Permanent Court of Arbitration in The Hague, which rules on international disputes. Telefonica’s decision to consider arbitration comes two weeks after the Portuguese government invoked its right to use its so-called ‘golden share’ to block the sale of PT’s 50% stake in Brasilcel, which controls Vivo. As reported in CommsUpdate, 74% of PT’s shareholders endorsed the improved EUR7.15 billion (USD9.1 billion) offer only to have the deal scuppered by Lisbon. If the case goes ahead it is understood Telefonica will argue that its Brasilcel joint venture is ‘no longer viable and should be dissolved’, the paper said.

Earlier this month the European Court of Justice (ECJ) ruled that the controversial golden share was unlawful and gave the Portuguese government unjustified influence over decision-making at the PT, something that would discourage investment. The court rejected Portuguese arguments seeking to maintain the special rights at Portugal Telecom. Despite the ruling PT apparently refuses to back down.

Brazil, Spain, PT Portugal (MEO), Telefonica