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Carrier Services
Vivendi’s bid expected to bolster Brazil’s GVT
Rival bid possible from Telefónica
by Tony Danby, Latin America Correspondent
French telecoms and media group Vivendi S.A. has pitched an unexpected €2 billion (US$2.9 billion) bid for Brazilian fixed line and broadband provider GVT (Holding) SA, which may lead to a counter bid from Spanish telecoms giant Telefónica, according to telecoms analysts.
Brazilian telecoms analysts believe that the bid will allow GVT to secure Vivendi’s experience in content delivery as well as gain financial muscle to continue its expansion plans while Vivendi moves towards a presence in Brazil and potentially in Latin America.
Vivendi, which reported revenues of €25.4 billion (US$37.2 billion), has been eyeing expansion opportunities in emerging markets such as Africa to help offset flagging fixed line sales in Europe. The French company launched an amicable tender offer this month with Swarth Group and Global Village Telecom (Holland) BV, the founding and controlling shareholders, at BRL42 (US$23.2) per share.
Henrique Scanavini, senior consultant at consultancy Frost & Sullivan in São Paulo, says that GVT has been a potential takeover target for several years. The surprise was that the bid came from Vivendi – the controller of videogames Activision Blizzard and Universal Music – rather than other telecoms operators such as Telefónica. Scanavini commented, “The bid is positive and will help GVT to grow faster by providing new capital.”
Jose Otero, president of Signals Telecom Consulting, believes that if the deal goes ahead GVT can tap Vivendi’s expertise in mobile services as well as the provision of pay TV services. Otero noted that this allows GVT to secure valuable content to differentiate from other market players by drawing on Vivendi’s Canal+ Group, Universal Music Group, NBC Universal and Activision Blizzard.
GVT, which provides services such as voice, broadband, data and VoIP, reported 2.3 million lines in service by June 30. The Curitiba-based operator also reported net revenues of around $800 million for the twelve-months to June 30.
According to Otero, Telefónica is likely to join the fight for GVT as it would provide a state-of-the-art fixed network outside of their concession area of São Paulo, the country’s largest city.
Otero noted that Telefónica’s fixed line operation Telesp has a smaller potential addressable market than its two main competitors, Brazil’s largest fixed line operator Oi and long distance operator Embratel. Otero sees these two companies as better positioned to provide solutions for large corporations requiring a national service provider.
Julio Puschel, telecoms analyst at US consultancy Yankee Group in São Paulo, sees Vivendi’s bid as expensive for the size of its operation and subscriber base. But, Pushcel added, “They [Vivendi] are paying for the opportunity to enter the Brazilian market and for GVT’s network.”
Even though Brazil’s fixed-line market is being trimmed as users turn to mobile phones, Puschel says that GVT has room to grow especially in broadband. GVT has been deploying fiber-to-the-home and offering broadband speeds of up to 100Mbps in the retail market and has also made inroads in attracting small and medium-sized companies.
Moreover, Puschel added that GVT is now well positioned to offer IPTV once the Brazilian regulations permit telecoms operators to provide television.
Puschel warned that the deal will need to pass regulatory hurdles such as approval from telecoms regulator Anatel, antitrust commission Cade as well as Brazilian Securities Commission CVM. And they will probably also need to overcome bids from the likes of Telefónica.
The launch of the tender offer is subject to due diligence to be competed by October 16. Vivendi and GVT’s boards also still need to give their approval.
But in Puschel’s opinion, if the deal goes ahead, GVT be in a strong position. “Vivendi brings investment power to GVT.”
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