Telecom Italia SpA is preparing an offer of as much as 7 billion euros (US$9.4 billion) to outbid Telefonica SA in the race to acquire Vivendi SA’s Brazilian broadband unit Global Village Telecom (GVT), people with knowledge of the plan said.
Vivendi would get a 20 percent holding in Milan-based Telecom Italia and a stake in the entity that combines the two companies’ Brazilian units, said the people, who asked not to be identified because the offer is not public yet. Telefonica — which competes with Telecom Italia in Brazil’s communications market — offered 6.7 billion euros for GVT earlier this month.
GVT, an Internet-access provider, would be a source of growth for Telecom Italia and Telefonica as revenue from providing telephone services drops in Spain and Italy amid intense competition. Telefonica’s offer for GVT came months after Telecom Italia chief executive officer Marco Patuano had expressed interest in the unit, people with knowledge of the matter said.
The Brazilian newspaper Folha de Sao Paulo reported on Saturday that Telecom Italia was set to make an all-stock bid for GVT valued at as much as 7 billion euros.
Telefonica, which on Aug. 5 offered 11.96 billion reais (US$5.3 billion) in cash and shares in its Brazil unit for GVT, put forward its bid after people at the company found out about talks between Telecom Italia and Vivendi, people with knowledge of the matter said.
In response, Telecom Italia said on Thursday that it was studying whether to suggest an “industrial combination” to Paris-based Vivendi, including joining its Brazilian unit Tim Participacoes SA with GVT. It said no offer has been finalized or made.
Vivendi said that as of Saturday it had received no offer and otherwise had no comment. GVT and Tim declined to comment on Saturday, and Telecom Italia press officials did not immediately reply to e-mails late on Saturday seeking comment.
Talks have taken place between Patuano and Vivendi chairman Vincent Bollore, people have said. The talks were under way before Madrid-based Telefonica made its bid for GVT.
GVT is working with financial advisers Goldman Sachs Group Inc and Credit Suisse Group AG on its potential sale, according to two people with direct knowledge of the matter.
Responding to Telefonica’s bid earlier this month, Vivendi said none of its units are for sale, though its board would consider the offer at its next meeting. Vivendi’s board is scheduled to meet at the end of this month, in conjunction with the company’s Aug. 28 earnings release.
While Telefonica’s bid is centered on GVT, Telecom Italia has proposed a broader alliance that could include the Italian company distributing content from Vivendi’s media assets, which include pay-TV provider Canal Plus, people have said. Telecom Italia has sought closer ties with broadcasters to expand in program distribution as prices of telephone calls slump.
Telefonica’s bid, meanwhile, might help it comply with regulatory rulings last year that called into question its role as a shareholder of Telecom Italia. In its proposal to Vivendi, Telefonica would give the French company the right to buy almost all of its stake in Telecom Italia.
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