PT: Portugal Government Golden Share Won't Be Used To Veto Vivo Bid

The golden share Portugal's government holds in Portugal Telecom SA (PT, PTC.LB) won't be used to block Telefonica's bid for the company's stake in Brazil's Vivo Participacoes SA (VIV, VIVO4.BR), PT said.

"This is not a golden share matter," Portugal Telecom's Chief Executive Zeinal Bava said late Tuesday in a presentation to investors.

The Portuguese government holds "golden share" voting rights that could give it authority to block the deal, but the European Commission has long insisted the golden share breaches the EU's single-market rules.

The Spanish telecommunications company last week raised its bid to EUR6.5 billion for PT's half of the two companies' joint venture, Brasilcel, a holding company that controls about 60% of Vivo.

Bava added in the presentation that the sweetened bid still didn't represent the "strategic value" of Vivo and the growth potential of the Brazilian telecommunications market.

Vivo is considered strategic by both Telefonica and PT, which face stagnant revenues in mature European markets, positioning Brazil as their main growth platform.

Bava also said "no consideration" should be given to Telefonica's threats last month of blocking dividends PT reaps from the joint venture if PT doesn't sell its stake in Vivo.

The Portuguese company has called a shareholders meeting on June 30 to allow its shareholders to vote whether the company should accept or reject Telefonica's offer.

PT said that if it sold its Vivo stake it would use the proceeds for "future investments, financing capital expenditure, repayment of existing indebtedness, repurchase of shares and distribution to shareholders."

Company Web site: http://www.portugaltelecom.pt

-By Jason Sinclair, Dow Jones Newswires; [phone]; [e-mail]