Legal Action

PT may seek to freeze Telefónica Vivo voting rights

Portugal Telecom has accused Telefónica of using "intimidating" tactics in its battle to secure control of their Brazilian cellphone joint venture Vivo and has threatened to take legal action.

Telefónica recently raised its offer for PT's 50 percent of Brasilcel to 6.5 billion euro from 5.7 billion euro . Brasilcel is a holding company that controls 60 percent of Vivo, Brazil’s largest mobile operator. PT has rejected the bid as undervaluing Vivo, but has agreed to put the offer to a shareholder vote scheduled for June 30. Telefónica also owns 10 percent of PT.

Telefónica has threatened to block payment of dividends by Brasilcel and has not ruled out a hostile bid for Vivo, which it wants to merge with its Brazilian fixed-line operator Telesp to lock in synergies through cost savings.

"Portugal Telecom believes that Telefónica's suggestions are intimidating in nature and any resulting action would amount to an unreasonable attempt to frustrate its joint venture partner," PT said in a statement filed late Thursday with the Securities Commission (CMVM).

PT said it had been advised by its legal counsel that in the event of any attempt by Telefónica to make good its threat to block dividend payments it could file a suit to have the voting rights of the Spanish operator in Brasilcel frozen with respect to certain issues.

(Published by El País – June 14, 2010)

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