UPDATE1-PT says stake in Vivo unit too valuable to sell

* CEO explains rejection of 5.7 bln euro bid by Telefonica

* Says selling Vivo would “amputate” PT’s future

* Reiterates PT situation solid

* Shares rise more than 15 percent

(Adds quotes, stock price)

By Sergio Goncalves

LISBON, May 11 (BestGrowthStock) – Portugal Telecom (PT) (PTC.LS: )
said it was holding on to its 50 percent stake in Brazil’s
wireless carrier Vivo as it was a pillar of growth that had
strategic value for the group, after rejecting a bid by Spain’s

Spain’s Telefonica, which is PT’s partner in Vivo (VIVO4.SA: )
had offered 5.7 billion euros ($7.65 billion) to PT for its
stake in Vivo, Brazil’s largest mobile phone operator, which
PT’s board unanimously rejected on Monday night.

“The value of a potentialising asset for future growth like
Vivo cannot be measured just by financial criteria. It is also a
strategic value and that is how it has to be considered,” PT CEO
Zeinal Bava told Reuters in an e-mail.

“Disinvesting in Brazil by selling Vivo would mean
amputating PT’s future since scale and growth are critical
factors of success in the telecommunications sector.”

Bava also reiterated that despite recent market turmoil in
Portugal due to investor concerns about the country’s
creditworthiness, PT had a solid financial situation with an
average debt maturity of over six years and financing needs
covered until the end of 2012.

Some analysts have suggested PT may try to buy out the other
50 percent of Vivo from Telefonica, especially if the Spanish
company clinches a merger deal with Telecom Italia (TLIT.MI: ).

Such a deal would impose restrictions on Telefonica’s
Brazilian holdings, requiring it to sell the Vivo stake, as
Telecom Italia owns Brazil’s third-largest wireless carrier TIM
Brasil (TCSL3.SA: ).

Bava made no reference to the possibility of buying the rest
of Vivo, but said PT was totally committed to its growth
strategy, aiming to make PT “a true multinational company with
100 million clients and two-thirds of its revenues coming from
international operations”.

Referring to a steep rise of more than 15 percent in the
value of PT shares in early trade, Bava said: “We salute the
fact that the market is increasing the value of our assets
because above all, it is a recognition of value creation work
done by PT’s management in Vivo.”

PT stocks retreated slightly after the initial surge, but
were still 9.4 percent higher at 7.79 euros at 1013 GMT.
Telefonica was 4.05 percent lower at 15.88 euros.

Stock Market News

(Reporting by Sergio Goncalves and Andrei Khalip; editing by
Karen Foster)

UPDATE1-PT says stake in Vivo unit too valuable to sell