Telefonica Sells 8% Of PT Ahead Of Vote For Vivo Stake Sale

Spain's Telefonica SA (TEF) said Wednesday it sold 8% of Portugal Telecom SGPS S/A (PT), in the latest signal of widening rifts between the two Iberian telecommunications companies.

A company spokesman confirmed Portuguese media reports about the transaction, but no additional details were immediately disclosed. At current market prices, the transaction could be worth some EUR800 million. The Spanish giant, which was the single largest shareholder in PT, still owns another 2% in the Portuguese company.

The sale of PT shares comes as Telefonica is trying to gain control of Brazilian mobile company Vivo Participacioes SA (VIV), which is jointly owned by the two companies. PT shareholders will meet next week to vote on Telefonica's unsolicited offer of EUR6.5 billion for PT's stake in Vivo after an earlier offer of EUR5.7 billion was rejected by PT's board.

Both Telefonica and PT control Vivo through a 50-50 joint venture in the investment vehicle Brasilcel, which controls 60% of Vivo. Both companies have been locked in a power struggle over Brazil's coveted telecommunications market. Senior PT executives argued the offer didn't value Vivo appropriately.

PT Chairman Henrique Granadeiro said in a television interview late Tuesday that Telefonica would be in a conflict of interest if it were allowed to vote on its own offer at next week's meeting.

PT has also rejected a proposal from Telefonica to discuss the distribution of an extraordinary dividend if the Portuguese company's shareholders agreed to sell Vivo's stake.

-By Santiago Perez, Dow Jones Newswires, 34 913958119, santiago.perez@dowjones.com

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