Portugal ruling revives Vivo bid

image captionPortugal blocked a deal for Brazilian mobile company Vivo

A bid by Spanish telecom firm Telefonica to control Brazilian mobile company Vivo moved a step closer after the European Court of Justice ruled a key obstacle to the deal was illegal.

Telefonica wanted to buy the stake in Vivo owned by Portugal Telecom (PT).

But despite shareholders backing the deal, Portugal's government, which holds a "golden share" in PT, vetoed the sale.

The ECJ ruled Portugal's action broke rules on the free movement of capital.

"The holding of golden shares confers on Portugal an influence on the management of Portugal Telecom which is not justified by the size of its shareholding," the court ruled.

Telefonica had offered 7.15bn euros (£6bn; $9.04bn) for the stake in Vivo.

'National interest'

Vivo is PT's only major overseas asset and the Portuguese government may not yet have given up hope of finding a way to stymie the deal.

"The government naturally respects the European Court of Justice's decision and will analyse the best way to comply with it," said Portuguese cabinet minister Pedro Silva Pereira.

"The state will search for solutions that allow full respect for EU law but that also safeguard the national interest."

Analysts however said that, following the ECJ ruling, the deal was now likely to proceed.

"I think now we have the green light for the deal to go ahead," said Tim Daniels at Olivetree Securities.

"We know it passed the shareholder vote, and Telefonica may now tweak the offer so that PT's board can recommend it. It is highly likely the deal goes through."

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