Telefonica confirmed the accord without giving a price. The agreement was reached late yesterday and the boards of both companies are meeting today to discuss it, said the two people, who declined to be identified before an announcement. Telefonica will initially pay 4.5 billion euros in the all-cash deal and the rest in two subsequent stages, one of the people said.
Telefonica chairman Cesar Alierta has raised the offer by 32% from his initial bid in May to gain control of Vivo, Brazils largest wireless company. Alierta wants to merge Vivo with Telecomunicacoes de Sao Paulo SA, or Telesp, the Spanish companys fixed-line unit in Brazil, to ride the growth in the Latin American country as business slows at home.
Strategically, this was clearly necessary for Telefonica and the price reflects that, said Alberto Espelosin, who helps manage about $12 billion at Ibercaja Gestion in Zaragoza, Spain, and owns Telefonica shares.
For its part, Portugal Telecom may reach an agreement within days to buy a stake in Brazils biggest phone operator Tele Norte Leste Participacoes SA, known as Oi, two people with direct knowledge of the negotiations said. Portugal Telecom will buy a 22.4 percent stake in Oi for about 3.7 billion euros, with influence over management, strategy, board representation and significant veto rights, one of the people said.
Portugal Telecom shares were suspended from trading, Euronext said today. The company declined to comment on the deals.