Vivendi receives Telecom Italia GVT bid as Telefónica ups offer

The Vivendi office is seen in Paris on Wednesday, May 17, 2006.Vivendi has confirmed it has received an offer from Telecom Italia for its Brazilian unit GVT, along with a new higher offer from Telefónica that its board will consider today. Vivendi said that both deals include proposals for wider content partnerships, without giving details of the latter.

Telecom Italia, as previously reported, has made a €7 billion offer for GVT, comprising €1.7 billion in cash along with a stake in Telecom Italia, comprising 16% of the company’s share capital and 21.7% of voting rights, and a 15% stake in Telecom Italia’s existing Brazilian subsidiary TIM Brasil post its absorption of GVT.

Telecom Italia’s offer is valid until September 10. The deal has yet to be submitted to the Italian telco’s shareholders and Telecom Italia would have an option to exit the deal if there is a loss of significant value to GVT.

Telefónica meanwhile has upped its original August 4 offer from €6.7 billion to €7.45 billion. The new offer comprises €4.663 billion in cash and a 12% stake in Telefónica Brasil. Vivendi would have the option to exchange about one third of the latter stake for 5.7% of the share capital and 8.3% of the voting rights of Telecom Italia currently held by Telefónica through the Telco holding vehicle.

The Telefónica offer expires tomorrow and Vivendi’s board will meet today to examine both bids. Telefónica said that the offer could be extended either if it decides to do so unilaterally or if Vivendi accepts an exclusivity commitment  to negotiate with Telefónica for a three months period.

Telecom Italia’s bid could be complicated by a move by Brazil’s fourth-placed mobile operator Grupo Oi to acquire its stake in TIM Brasil and pre-empt a foreign-led consolidation of the country’s mobile sector. Oi said yesterday that it had hired investment bank and shareholder BTG Pactual to explore the acquisition of Telecom Italia’s 67% stake in TIM Brasil in partnership with Mexico’s America Movil and Telefónica.

Telecom Italia said that “TIM Brasil is a strategic asset on which it is committed to concentrating important investment and growth prospects” and that it had no knowledge of the Oi initiative.