UPDATE:Telefonica Asks PT For Dividend If Holders OK Vivo Bid

Telefonica SA (TEF) Tuesday proposed that Portugal Telecom SGPS S/A (PT) pay out an extraordinary dividend of EUR1 a share or more if the Portuguese company's shareholders agree to sell the firm's stake in Vivo Participacioes SA (VIV).

Telefonica recently made a EUR6.5 billion bid for Portugal Telecom's stake in Brazilian mobile company Vivo. Both Telefonica and PT control Vivo through a 50-50 joint venture in the investment vehicle Brasilcel, which controls 60% of Vivo.

In a regulatory filing, Telefonica said it had asked for the proposal to be included in a shareholder vote at PT's upcoming extraordinary shareholder meeting scheduled June 30. Both companies have been locked in a power struggle over Vivo since Telefonica made an offer to buy PT's stake in the company last month.

Portugal Telecom has said the offer doesn't value Vivo appropriately but will allow its shareholders to vote over whether it accepts Telefonica's offer or not.

Telefonica owns 76.3 million shares in PT, or 8.51% of the company's stock.

PT has 1.13 billion shares outstanding.

-By Christopher Bjork and Jason Sinclair, Dow Jones Newswires, [phone], [e-mail]