Spain Beats Portugal for Big Share of Exploding Brazil Wireless Market

Telefónica, the Spanish telecommunications company, has won full control of Vivo, the mobile phone venture it had with Portugal Telecom in Brazil,

after raising its bid for a third time, to 7.5 billion euros, thereby overcoming opposition from the Portuguese government.

The deal, worth about $9.8 billion, was announced Wednesday by the Spanish stock market regulator.

The agreement is expected to end a lengthy tussle between two European telecommunications operators

Telefónica, the Spanish telecommunications company, has won full control of Vivo, the mobile phone venture it had with Portugal Telecom in Brazil,

after raising its bid for a third time, to 7.5 billion euros, thereby overcoming opposition from the Portuguese government.

The deal, worth about $9.8 billion, was announced Wednesday by the Spanish stock market regulator.

The agreement is expected to end a lengthy tussle between two European telecommunications operators

that have come to rely increasingly on earnings from Brazil’s fast-growing mobile market to offset sluggish performances at home.

The corporate dispute had ballooned into a European political issue

because of Lisbon’s determination not to allow Portugal Telecom, the country’s flagship operator,

to be pushed out of Brazil, where the number of wireless subscribers grew 15 percent last year.

Telefónica will now be paying almost a third more than it initially offered in early May for Portugal Telecom’s 50 percent stake

in the holding company that controls Vivo, the leading operator in Brazil.

Last month, the Portuguese government vetoed an increased offer of 7.15 billion euros.

José Sócrates, the Portuguese prime minister, justified the decision by saying that a presence in the lucrative Brazilian market

was “strategic and fundamental for the development of Portugal Telecom.”

The government’s veto overrode a vote by Portugal Telecom shareholders in favor of the Spanish company’s offer.

In opposing the sale, the Portuguese government ran afoul of a ruling by the European Union’s highest court;

its intervention was also condemned by antitrust officials in Brussels as evidence of protectionism and a violation of the free movement of capital.

The agreement is likely to be a relief to investors on both sides,

after the Spanish operator had threatened to start what was likely to be a lengthy and costly legal battle

to circumvent the Portuguese veto and gain control of Vivo.

“Telefónica is paying more than they would have hoped, but to see a conclusion of the Vivo situation is still good news,”

said Luigi Minerva, a telecommunications analyst at HSBC in London.

As it moves out of Vivo, Portugal Telecom is investing in another Brazilian wireless operator, Telemar Norte Leste, also known as Oi.

According to securities filings, Portugal Telecom has agreed to pay $4.8 billion for indirect and direct stakes that equal 22.4 percent of Oi,

which provides Internet access, mobile, fixed-line and pay-television services.

Telemar also plans to acquire 10 percent of Portugal Telecom, replacing Telefónica as the Portuguese company’s biggest investor.

Oi, based in Rio, had a 20.1 percent share of the Brazilian wireless market in June,

while Vivo, the leader in the market, had 30.2 percent,

according to the Brazilian telecommunications regulator.

Vivo reported strong earnings, with its number of clients increasing 20 percent in the second quarter from the year earlier, to 56 million.

Net income rose 30 percent, to 236 million reals, or $134 million, Bloomberg News reported from London.

Telefónica’s revenue in Spain fell 3.9 percent in the first quarter, according to this report from the New York Times,

while revenue from Brazil and its other Latin American businesses rose 4.2 percent.

A similar performance had unfolded for Portugal Telecom, whose domestic wireless revenue fell 6.5 percent in the first quarter

while revenue from its Brazilian wireless business rose 26 percent.