Telefonica Offers Portugal Telecom EUR3B To Buy Vivo

MADRID (Dow Jones)--Telefonica is offering over €3 (US$4.1) billion to Portugal Telecom for exclusive control of its Brazilian mobile telephone unit Vivo Participacoes, the Financial Times reported on its website Monday.

Telefonica controls Vivo jointly through a 50-50 partnership with Portugal Telecom, but friction between the two companies has complicated Vivo's gameplan in the key Brazilian market, Telefonica's chief executive Cesar Alierta told the Financial Times.

Spokespeople for Telefonica and Portugal Telecom declined to comment on the report.

"The acquisition would be a nice move for Telefonica, although the company's interest in Vivo is not new," Banesto analyst Juan Tuesta said. "Telefonica tends to be very prudent about communicating purchases, so this deal is probably agreed and iminent", Tuesta added. Banesto rates Telefonica at overweight with a EUR19.54 target.

At 1110 GMT, Telefonica shares were flat at EUR16.73 in an overall negative Madrid market.

Telefonica faces stiff competition in Brazil, the world's fourth largest mobile market by subscribers, from archrival America Movil, owned by the world's richest man Carlos Slim.

Alierta also said he doesn't rule out the possibility of eventually gaining control of Telecom Italia.

Earlier this year, Telefonica bought an indirect stake in Telecom Italia in a move market observers said was an effort to strengthen its hand if the Italian company decides to put mobile unit TIM Participacoes, Brazil's largest mobile operator, up for sale or makes other moves in Latin America.

-By Jason Sinclair, Dow Jones Newswires, 34 913958127, jason.sinclair@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 10th July 2007