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Telefonica Gets Brazilian Regulator's Nod to Acquire GVT - Analyst Blog

Zacks Equity Research
Updated

Recently, Spanish telecom behemoth Telefonica S.A. (TEF) received a green signal from Brazil’s regulatory authority, ANATEL, for its proposed takeover of Vivendi’s broadband assets – GVT. In Sep 2014, Telefonica had entered into an agreement with Vivendi to acquire GVT for a total consideration of €7.24 billion (approximately $9.3 billion). The sanction came much ahead of the anticipated period which is the first half of 2015.

Per the deal, Telefonica will pay Vivendi €4.66 billion (around $6.0 billion) in cash, €450 million ($578 million) in debt obligation and also a 7.4% interest in Telefonica Brasil S.A. (VIV) valued at around €2.02 billion ($2.59 billion).

Moreover, Vivendi will receive Telefonica’s 5.7% stake in Telecom Italia S.p.A (TI) valued at €1.01 billion (about $1.29 billion), gaining 8.3% of voting rights in the Italian company.

ANATEL has imposed certain stringent conditions on Telefonica while approving the GVT takeover. Both the companies have to forgo some of their fixed telephony licenses in those areas where the two companies’ services overlap.

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Further, Telefonica and GVT will have to continue with their existing service plans for another 18 months. Finally, the transfer of Telecom Italia’s shares to Vivendi will be reviewed by the regulator separately.

For Telefonica, synergies from the acquisition appear quite promising. The deal is expected to put Telefonica in a better position within the broadband segment against stronger rivals like America Movil SAB de C.V. (AMX) and Oi.

Additionally, GVT will expand Telefonica’s broadband network to 10.4 million homes across 21 Brazilian states apart from fortifying its broadband customer base by an additional 2.5 million. The transaction will give Telefonica an impressive 30% broadband market share in Brazil. Telefonica currently carries a Zacks Rank #3 (Hold).


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TELEFONICA S.A. (TEF): Free Stock Analysis Report
 
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
 
TELEF BRASIL SA (VIV): Free Stock Analysis Report
 
TELECOM ITA-ADR (TI): Free Stock Analysis Report
 
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Zacks Investment Research