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Wheelings & Dealings: $9 Billion Offer by Telefonica to Acquire GVT

TMCnet Feature

August 06, 2014

Wheelings & Dealings: $9 Billion Offer by Telefonica to Acquire GVT

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By Joe Rizzo
TMCnet Contributing Writer

Telefonica (News - Alert), S.A. is a Spanish broadband and telecommunications provider. The company has operations in Europe, Asia, North America and South America. On a global level, it is the sixth largest mobile network provider in the world. GVT stands for Global Village Telecom. It is a Brazilian telecommunications company that offers services on landline telephone, broadband, both for consumer and business, Pay TV and voice over IP. GVT was founded at the end of 2000.


Currently, GVT is owned by a French media and telecommunications company called Vivendi (News - Alert). Telefonica’s goal in acquiring GVT from Vivendi is to be able to merge it with its Brazilian division, Telefonica Brazil. According to Telefonica, if the deal goes through, the combination of Vivo, which is the brand name that Telefonica is known as in Brazil, with GVT would have the result of creating the largest telecom operator in Latin America. Brazil is considered to be Latin America’s largest market.

Internet-based services are giving telecom operators and Pay TV providers a run for their money. The competition is high and the operators are looking for a way to stay on top. In order to do that the goal is to find compatible companies that when combined can offer mobile and fixed broadband and TV services operating through their own networks.

Competition from proprietary, cross-platform instant messaging subscription service, WhatsApp Messenger and freemium Voice-over-IP (VoIP) Skype (News - Alert), are resulting in a diminishing revenue stream for the telecom operators. Add to the mix the fact that you have companies such as Netflix and Amazon, you come to the conclusion that the telecom operators have to build up their resources in order to reclaim the market.

According to Vivendi, GVT’s network is the most modern in Brazil. It includes one of the most extensive local access and long distance fiber infrastructures. When you take into account that Vivo is the largest mobile operator in Brazil, you can see what the combination of these two companies will do for the market.

The deal will be on the table for about a month. Unless Vivendi quickly decides to accept the offer or ask for an extension, the deal is set to expire on September 3rd. The deal consists of a variety of options. There will be some cold hard cash, but there will also be newly issued shares which would represent a 12 percent stake in the merged companies. Vivendi will also have an alternative option. In addition to the money, they can take an 8.3 percent stake in Telecom Italia (News - Alert).

This seems to be a worldwide trend. Vodafone Group, which is a British multinational telecommunications company, recently acquired Ono, a Spanish cable operator. Additionally, Vodafone (News - Alert) also acquired Germany’s largest cable operator, Kabel Deutschland. This was all done in an effort to strengthen and complement its mobile activities in the two countries. I suspect that we will see more mergers of this type on a global level in the near future.





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