Telefónica is exploring a purchase of Brazilian operator Desktop worth up to $1.5 billion.
Telefónica has confirmed its interest in acquiring Brazilian fixed broadband operator Desktop, the third largest telecommunications company in Sao Paulo after Claro (America Móvil group) and Vivo (Telefónica). Through a related fact circulated in Brazil, the Spanish group informs the market that “it constantly analyzes market opportunities and investments in accordance with its strategy.” At the same time, the Spanish group indicates that it is “currently negotiating a potential transaction involving Desktop”, although to date “there has been no definition or formalization.” However, the telecommunications company undertakes to “hold its shareholders and the market as a whole reasonably compliant with applicable rules.”
Telefonica’s move to Brazil represents an important milestone in the company’s recent history as the Spanish group focuses its goals on organic growth in Latin America’s largest telecommunications market. In this case, Desktop’s value is considered strategic because it is the third largest Internet service provider in Sao Paulo, Brazil’s most populous and prosperous region. In the mobile phone industry, Desktop uses TIM’s cellular network under a virtual mobile operator model.
Market sources estimate the deal to be worth €1.5 billion, although other analysts have significantly lowered the figure. It’s a company anyway with over a million subscribers and a fiber network deployed to 4.2 million homes in Sao Paulo. Integrating Desktop into Vivo (Telefonica’s commercial brand in Brazil) would allow the Spanish operator to surpass Claro in the state where almost a quarter of the country’s wealth is concentrated. Claro currently has a 30% market share in Sao Paulo with 4.45 billion customers compared to Claro’s 4.3 million, while Vivo has a 295% market share.
As reported by the portal Tele.Sintese, the Brazilian sector regulator (CVM, Comissao de Valores Mobiliários) last week questioned Desktop due to the increase in the value of the stock market, with trading volume increasing nine times compared to any normal day. in the amount of 15.53%. In response to this request, the São Paulo operator linked the said revaluation to the publication of the online newspaper Neofeed, citing extensive conversations between Telefónica and Desktop and expecting a quick decision. For its part, Desktop told CVM that it was “assessing opportunities with a view to creating value,” but “without determining the implementation (agreement) or terms of any potential transaction, or whether there are guarantees of its implementation.” closure.”
It is imperative that Anatel and Cade examine in detail the scope of the concentration as it changes the competitive map in São Paulo, so Telefónica and Desktop will suspend the signing of the agreement until regulatory approval is obtained.
Telefonica has Brazil as the world’s second-largest market by revenue, behind only Spain, although the region is forecast and growing with particular vigor in the coming years. According to data for the first quarter of the year, Telefónica’s Brazilian subsidiary posted turnover of €2,520 million, up 10.4% compared to the first quarter of 2023, and double-digit EBITDA growth (10.7%) at €1,022 million.
Telefonica’s last major operation in Brazil dates back to 2015, when the Spanish group acquired internet and pay-TV operator Global Village Telecom (GVT) from Vivendi for €4.6 billion. The purchase allowed Vivo to strengthen its internet and pay TV services in the south of the country.