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Telecom Wars: The Battle for Brazil

Telefónica's CEO Cesar Alierta prepares to challenge Carlos Slim's plans for Brazil

Telefónica's Cesar Alierta prepares to challenge Carlos Slims' plans for Brazil

Spain’s Telefónica announced today the successful takeover of leading Brazilian mobile operator Vivo after weeks of strained negotiations with its joint-owner Portugal Telecom (PT). The move will allow Telefónica to merge its fixed landline services with Vivo’s national mobile network and begin offering Brazilian consumers ‘triple-play’ and ‘quadruple-play’ service packages (i.e. fixed-phone, internet, television, and mobile telephony).

Negotiations were revived after the European Court of Justice ruled that the Portuguese state’s veto of the transaction, permitted under their ‘golden share’ rights, was illegal. Telefónica closed the deal after raising its original offer to PT’s stakeholders by a third and agreeing on the final selling price of 7.5 billion euros ($9.8 billion USD). Although the new price totals more than the entire 7.4 billion euro ($9.61 billion USD) value of Portugal Telecom itself, the Brazilian market’s future growth prospects are estimated to have made the deal worth the colossal short-term cost.

Telefónica is now primed to compete with market leader América Móvil – owned by Mexican telecommunications billionaire Carlos Slim – in offering packaged internet, telephony and television services to Brazil’s fast-growing consumer market. Telefónica’s announcements come as Mr. Slim prepares to conclude his plans to merge his wireless and fixed-line interests in Brazil (Claro mobile and fixed-line owner Embratel) and be the first company to offer Brazilian consumers the combined communications and entertainment services already enjoyed in neighboring countries. The consolidation of Mr. Slim’s telecom interests in Brazil are expected to add an additional 50 million customers to Claro and Embratel’s parent company América Móvil and cement Mr. Slim’s hegemony in the Brazilian and Latin American telecommunications market.

Following today’s announcement Telefonica’s shares rose by nearly .4% to $66.38, while América Móvil’s shares dropped slightly by .08% to $51.01 (as of 10:48 ET).



Rodrigo Camarena

Rodrigo is an analyst and consultant on Latin American business, politics and public policy. He is a graduate of the London School of Economics and New York University. Follow him on twitter @Ro_Camarena and find more articles by him by visiting: