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Telefónica is looking for closer incorporation between its fixed line phone business in Brazil and a mobile operator based in São Paulo which it mutually manages with Portugal Telecom, as the telecoms group from Spain is putting efforts to prop up its weakening position in Brazil.
Brazil is the largest generator of profit among Telefónica’s South American telecom industries, but the Spanish telecom group’s fixed line assets in Brazil are performing poorly in an environment of increasing rivalry.
Telefónica is looking towards improving its contemporary position by removing cost savings via a profound working association between Telesp, Telefónica’s Brazilian fixed line phone entrepreneurship and
Brazil’s largest telecom operator Vivo, which is mutually managed by Portugal Telecom and the group from Spain.
During the upcoming weeks, Telefónica is predicted to conduct discussions with Portugal Telecom regarding the case for closer incorporation between Vivo and Telesp. Portugal Telecom and Telefónica refused to comment on the issue.
Telesp’s performance, whose market capitalization is R$16.7 billion, was blemished by meager customer service in the previous year, and it accounted a huge 16% fall in turnover for the final 3 months of the previous year.
Telefónica is also up against sharp competition in the country. French telecom and media corporation, Vivendi, warded off the interest from the Spanish group last year to take over GVT, a fast developing broadband and fixed line phone corporation.
The hopes of Telefónica on protecting closer association between Vivo and Telesp relax on attaining an agreement with Portugal Telecom. Vivo’s two unified managing shareholders have quarreled in the recent past. Telefónica will prefer full control of Vivo. However, Portugal Telecom insists that it wants to stay in Brazil.
Vivo’s market capitalization is R$18.2 billion and Portugal Telecom and Telefónica mutually own a holding company which owns a 59% stake in the telecom operator. Three years back, Portugal Telecom discarded a 3 billion euro-plus bid by Telefónica to purchase it out of Vivo.
Several options are being considered by Telefónica for improving its contemporary position in Brazil. It has made a decision to primarily focus on trying to counterfeit closer incorporation between Vivo and Telesp. By combining marketing, back office functions, and network, it can lock important cost savings for Vivo and Telesp.
If Portugal Telecom and Telefónica cannot attain any sort of agreement on closer incorporation between Vivo and Telesp, Telefónica might just look at some more determined strategies.
A choice for Telefónica can be the capturing Telecom Italia. Telecom Italia manages Brazil’s 3rd largest telecom operator, TIM Brazil.
