PREVIEW-EU poised to outlaw Portugal Telecom golden share

* Court decision due on Portugal Telecom golden share

* Ruling expected to follow advocate-general’s opinion

* Long-running legal battle over Vivo may ensue

By Victoria Howley

LONDON, July 8 (BestGrowthStock) – The European Court of Justice is
likely to outlaw the Portuguese government’s golden share in
Portugal Telecom (PTC.LS: ) on Thursday, opening the way for a
potential legal battle to decide the fate of Telefonica’s
(TEF.MC: ) bid for Vivo (VIVO4.SA: ).

Portugal stunned investors last week by using its golden
share to block a shareholder vote overwhelmingly in favour of
selling PT’s stake in Vivo, Brazil’s top cellphone company, to
its joint venture partner, Spain’s Telefonica, for 7.15 billion
euros ($9.6 billion).

The veto came just ahead of the case before Europe’s highest
court and follows an opinion last December by advocate-general
Paolo Mengozzi, who said Portugal had failed to justify its
right to overrule decisions affecting Portugal Telecom.

“I’d be very surprised if the Court goes against the opinion
of the advocate general. I think the golden share will be
declared illegal,” said Andrew Hockley, a partner specialising
in EU and competition law at Berwin Leighton Paisner.

The European Commission first took Portugal to court in
2008, arguing that the golden share breached laws on the free
movement of capital in the 27-country European Union.

Decisions by advocates-general are not binding on the
European Court of Justice, although lawyers said they are
followed in about 80 percent of cases.

The European Commission has been on a drive to abolish
golden shares in the last five years because it says they act as
a barrier to cross-border investment.

Governments have already given up golden shares in some of
Europe’s biggest companies including Telefonica, Spanish utility
Endesa (ELE.MC: ) and British airport operator BAA.

Many golden shares date back to the European privatisation
rounds of the 1980s and 1990s, which were designed to make state
sell-offs more palatable to the general public and often
conferred the power to block foreign takeovers.

Pending cases due to come before the Court of Justice
include Portugal’s stakes in energy companies Galp (GALP.LS: ) and
Energias de Portugal (EDP.LS: ).
($1=.7453 Euro)
(Editing by Simon Jessop)

PREVIEW-EU poised to outlaw Portugal Telecom golden share