Telefonica: PT Share Sale Aims To Transfer Voting Rights

Spanish telecoms giant Telefonica SA (TEF) decided to sell 8% of Portugal Telecom SGPS S/A (PT) in order to transfer voting rights to other shareholders ahead of a key vote next week, a Telefonica spokesman said Thursday.

Citing a conflict of interest, PT officials have hinted they would move to bar Telefonica from voting on the offer the Spanish company has made to buy PT's half of the two companies' Brazilian joint venture for EUR6.5 billion. PT has called an extraordinary general meeting on June 30 to vote on the offer.

Both companies view their Brazilian investment, through which they control Vivo Participacioes SA (VIV), as key to their future growth prospects.

Senior PT executives say Telefonica's offer doesn't value Vivo appropriately. Telefonica's earlier bid of EUR5.7 billion was rejected by PT's board last month.

The Telefonica spokesman said the over-the-counter sale of PT shares the company announced Wednesday, worth some EUR800 million at current market prices, is being conducted through two investment banks.

PT said late Wednesday that several international hedge funds and asset management firms have purchased PT shares.

No additional details have been disclosed.

Other core, local PT shareholders include Portuguese banks Banco Espirito Santo SA (BES.LB) and Caixa Geral de Depositos. The Spanish giant, which was the single largest shareholder in PT, still owns another 2% in the Portuguese company.

Telefonica has also purchased equity swap contracts to buy back the 8% of PT that it is in the process of selling if it is forced to comply with an agreement that gives the Portuguese company the option to buy back Telefonica's 10% stake.

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

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