Telefonica Lashes Out At PT Directors Over Brazil JV Offer

Telefonica SA (TEF) said Wednesday that Portugal Telecom's (PT) directors may not be fully aligned towards shareholder value creation by rejecting its offer for PT's stake in Vivo Participacoes SA (VIV), in the latest signal of widening rifts between the two Iberian partners over control of the Brazilian mobile operator.

In a presentation to investors, Telefonica said PT's directors rejected the Spanish company's EUR5.7 billion bid for control of Vivo "without due consideration."

Portugal Telecom and Telefonica currently share control of Brasilcel, a holding company that owns about 60% of Vivo. The joint venture has existed since 2001, but each company has previously sought to buy the other's stake. PT has so far rejected Telefonica's offer and described Vivo as a strategic asset and Brazil as a key market.

"International shareholders shouldn't be prevented from having their say on Vivo," Telefonica said in its presentation.

Telefonica, which owns 10% of PT, began a roadshow Wednesday to persuade other major shareholders in the Portuguese company--including U.S. investors Brandes Funds and Blackrock Inc.--to back its bid for control of Vivo as part of an effort to increase scale and unlock synergies in the fast-growing Brazilian communications segment.

Company Website: www.telefonica.com

-By Santiago Perez, Dow Jones Newswires; 34 91 395 8119; santiago.perez@dowjones.com

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