(Adds more share movements, analyst comment, competitive context)
SAO PAULO, Aug 5 (Reuters) - Brazilian telecom shares tumbled on Tuesday, as Telefonica’s bid for Vivendi’s local broadband operator scrambled bets on an expected consolidation in the country’s cooling mobile market.
Shares of Telefonica Brasil SA fell more than 5 percent in Sao Paulo trading after Spanish parent Telefonica SA offered cash and new shares worth a combined 6.7 billion euros ($9 billion) for Vivendi’s GVT SA, the fourth-largest Brazilian broadband provider.
The aggressive bid, close to the 7 billion euros Vivendi sought for GVT in a round of bidding last year, appeared to foreclose other merger options that had boosted Brazilian stocks in recent months.
Rather than trimming Brazil’s biggest telecoms from four to three, as earlier merger speculation suggested, the deal promises an expensive boost to Telefonica’s network without relieving competitive pressure in a cooling market.
TIM Participações SA, which had been floated as a potential merger partner for GVT, shed more than 5 percent, as did controlling shareholder Telecom Italia SpA.
“TIM Brasil’s smaller size and Telecom Italia’s more limited financial maneuvering seem important obstacles for a potential counter bid,” Bank of America Merrill Lynch’s trading desk told clients in a note. “We would expect Vivendi to accept the offer, given its high embedded valuation.”
Telefonica’s offer also included a chance for Vivendi to acquire its 8.3 percent stake in Telecom Italia. Such a move would relieve the antitrust pressure on Telefonica in Brazil that has driven rumors of consolidation in the wireless market.
Brazil’s mobile market has turned sluggish in recent years, while required investments in new technologies have soared, adding to expectations that TIM could be broken up and divided between its three rivals.
Homegrown Brazilian telecom Grupo Oi SA was expected to play a key role in that process, but a bad investment by merger partner Portugal Telecom SGPS SA has left the resulting company constrained by heavy debts.
Oi shares fell nearly 5 percent in Sao Paulo trading. (Reporting by Brad Haynes; Additional reporting by Walter Brandimarte in Rio de Janeiro; Editing by David Gregorio)