New government set to relinquish ‘golden shares’ in PT

6 Jul 2011

According to Reuters, Portugal’s new centre-right government has confirmed that it intends to relinquish the so-called ‘golden shares’ held by the state in a number of prominent companies – including Portugal Telecom (PT). PT has a distributed share ownership, with the state retaining a 3.5% ‘golden share’, which gives it the power of veto over strategic policy decisions. In February 2008 the European Commission (EC) warned that it would begin legal action to force the government to give up the preferential stake on the basis that it contravened European Union (EU) rules and deters investment from overseas firms.

On 5 June 2011 Pedro Passos Coelho led the centre-right Social Democratic Party to victory over the Socialist Party, led by incumbent Prime Minister Jose Socrates. The new government was warned that it must implement a rigorous austerity programme as a pre-condition of its EUR78 billion (USD113 billion) EU bailout deal. It has been reported that the abolition of the golden shares is one of a number of obligations associated with the bailout. This week incoming finance minister Vitor Gaspar told a news briefing: ‘The emphasis of this government is to consolidate the budget [and to] containing spending. To meet that objective in the short- and medium-term we have to accelerate the process, and the government will act with the necessary urgency’. Gaspar noted that the government is still considering precisely what it intends to do with the actual shares.

As previously reported by TeleGeography’s CommsUpdate, in June 2010 Lisbon used its controversial ‘golden shares’ to block Telefonica’s EUR7.15 billion bid for PT’s 50% stake in Vivo, Brazil’s largest wireless operator by subscribers. The government’s move came after 74% of PT shareholders accepted Telefonica’s offer to buy Vivo. The European Court of Justice (ECJ) was forced to intervene, and duly ruled that the golden shares were unlawful, giving Portugal an unjustified influence over decision-making at PT – something that would discourage investment. PT later approved a revised deal with Telefonica.