Spanish telecom behemoth Telefonica S.A. TEF has reportedly closed the acquisition of Vivendi’s broadband assets – GVT. Per the deal, Vivendi has valued GVT at a consideration of €7.5 billion, based on the recent valuations of Telefonica Brasil S.A. VIV and Telecom Italia’s S.p.A TI shares.
In Mar 2015, Telefonica received the final approval from Brazil’s regulatory authority, ANATEL, related to its takeover of GVT. The regulatory body cleared the second part of the deal which involved the share transfer.
In Sep 2014, Telefonica had entered into an agreement with Vivendi to acquire GVT. The initial regulatory nod was received in Dec 2014. Per the deal, Telefonica had agreed to pay Vivendi €4.66 billion (around $6.0 billion) in cash, €450 million ($578 million) in debt obligation and transfer 11.3% non-voting stake in Telefonica Brasil valued at around €2.02 billion ($2.59 billion).
Additionally, in the weeks ahead, Vivendi will receive Telefonica’s 5.7% stake in Telecom Italia valued at €1.01 billion (about $1.29 billion), gaining 8.3% of voting rights in the Italian company.
We note that only last week, Telefonica Brasil’s shareholders gave their go-ahead to the proposed deal. Also, the company has elected Amos Genish as the new CEO to supervise the integration procedure.
Meanwhile, the Brazilian regulator has imposed certain stringent conditions on Telefonica while approving the GVT takeover. Both the companies will have to forgo some of their fixed telephony licenses in those areas where their services overlap. Further, Telefonica and GVT will have to continue with their existing service plans for another 18 months.
Nonetheless, for Telefonica, synergies from the acquisition seem quite promising. The deal is expected to place Telefonica in a better position within the broadband segment against stronger rivals like America Movil SAB de C.V. AMX and Oi.
Additionally, the GVT assets will expand Telefonica’s broadband network to 10.4 million homes across 21 Brazilian states apart from fortifying its broadband customer base by an additional 2.5 million. The transaction has duly opened up scope for an impressive 30% broadband market share gain in Brazil for Telefonica.
Telefonica currently carries a Zacks Rank #3 (Hold).
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