José Sócrates

"The veto is to defend our interests"

An interview with the  Prime Minister of Portugal José Sócrates, by El País about the decision to block the sale of Vivo to Spain's Telefónica.

The Portuguese government's decision to block the sale of Vivo to Spain's Telefónica has prompted harsh criticism from within the EU, as well as business circles. José Sócrates, the Socialist Party prime minister, says he used the government's golden share in Vivo's owner, Portugal Telecom (PT), in "the general interest." The purchase has been delayed until the European Court of Justice rules on the matter. Sócrates says that he doesn’t regr"t the decision, and says that a prime minister should never “allow himself to be cornered."

The interview begins at 9pm on Thursday, the day after PT's annual general shareholders’ meeting, at which the decision to block Vivo's sale was made. As the prime minister enters the room in his official residence where the meeting is to take place, he seems tired, but resolute, jokingly quoting Horace's dictum: "Who fears the storm will end up on their knees."

Question. Was the use of the government's golden share veto to overrule the 74 percent of shareholders who had voted in favor of accepting Telefónica’s offer an attack on the shareholders?

Answer. Not at all. The company has its statutes. We haven't attacked anybody's interests. We are defending our interests, and we have the right to do that. We have not broken any laws. The special rights given to the government were approved by the shareholders when PT was privatized. I never thought that I would use the right to veto, because I always thought that Telefónica would have the common sense to take our strategic interests into account and negotiate with PT's management.

Q. The golden share may figure in PT's statutes, but the company's president, Zeinal Bava, along with 25 members of the board have said before and after the shareholders' meeting that in the case of the Telefónica offer, the golden share wasn't applicable, and gave the government no special rights.

A. That is a legal question. The government, based on solid legal arguments, argues that its special rights are applicable.

Q. But the state's vote has different impact to that of any other shareholders, because its special powers can overrule the vote.

A. Exactly, that is what PT's statutes say. That is the law.

Q. PT's board doesn’t share your view.

A. The board has no say in the way the annual general shareholders' meeting is run. Each of the shareholders vote according to their wishes. I am not forcing them to change their vote, but the shareholders cannot force the state's hand.

Q. In all likelihood, the European Court of Justice will, on July 8, rule that the golden share is illegal. What will you do then?

A. We'll have to wait and see.

Q. The European Commission has criticized your use of the golden share, arguing that you have prevented the free movement of capital.

A. A process has begun. We are not going to try to anticipate the Court's ruling. But I will say that the Commission is wrong when it argues that the Portuguese state has given itself special powers. That is not true. The EU is against the state having a stake in companies. This is not so much about economy as ideology.

Q. Are you suggesting that the European Commission isn't respecting the Portuguese state?

A. Of course it respects it, and it is normal for the Commission to reaffirm its position. But I don't agree with it.

Q. So why did you use the state's golden share?

A. I have said this many times. Telefónica should listen to what we are saying. I am thinking of the strategic interests of PT and my country.

Q. So what should Telefónica have done?

A. I am sorry that Telefónica didn't negotiate with PT's management. Let's go back to the beginning. Telefónica made its offer the night before the shareholders' meeting. PT's management didn't have time to fully assess the offer. We must remember that Vivo was PT's investment in Brazil, a strategic decision that was criticized back in 1998. I was in the government. Later, PT invited Telefónica to become a partner in the venture; but that doesn’t give Telefónica the right to take over Vivo.

Q. Telefónica's offer of 7.1 billion euro close to PT's value on the stock exchange. From a strategic point of view, with that amount of money, couldn't PT look for new growth areas?

A. I don’t know. I haven't seen any plans of that kind.

Q. Were you hoping that Telefónica would better its offer?

A. What I was hoping for was that Telefónica would have negotiated with PT's management, where the state has no presence. Negotiating is not the same as imposing.

Q. But Telefónica made an offer.

A. It made an offer to the shareholders. It should have negotiated with PT's management. When the state is involved in a shareholders' meeting and the deal is take the offer or leave it, then the state has to respond. And I did. No thank you.

Q. Was your decision politically based?

A. Not at all. It was a rational decision that has nothing to do with politics. I am defending the general interests of PT.

Q. Many shareholders have the feeling that they have been vetoed, that they have been overruled.

A. That is totally false. I have not imposed anything. I have acted within PT's statutes. It isn't me that is imposing, but others.

(Published by El País – July 5, 2010)

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