Vivendi picks Telefonica in GVT fight

PARIS/MILAN (Reuters) - French media group VIVENDI (VIV.PA) said it would enter into exclusive talks with TELEFONICA (TEF.MC) over the sale of its Brazilian broadband unit GVT, choosing the Spanish group over a rival bid from Telecom Italia .

Telefonica bid more than Telecom Italia for GVT to ensure that it won the broadband and pay-TV provider, which it will fold into Brazil's leading mobile carrier Vivo .

For Vivendi, the GVT sale caps a tumultuous two-year revamp in which it sold off three telecom businesses and its video games arm so as to pay down debt and focus more on media and content.

Vivendi will get 4.66 billion euros($6.14 billion) in cash from Telefonica, which raised the cash part of a previous bid on Thursday to see off the Telecom Italia challenge.

On top of the cash, Vivendi will get a 12 percent stake in the combined Brazilian entity of which about one third could be exchanged for a 5.7 percent stake in Telecom Italia if Vivendi so chose.

"The Telefonica offer best meets the group's strategic and financial objectives," said the French company.

"Vivendi begins a new phase in its development to become an integrated industrial group focused on media and content."

French tycoon Vincent Bollore, who is Vivendi largest shareholder, led the talks with Telefonica and Telecom Italia in recent weeks in his first major strategic move since taking over as chairman in June.

Telecom Italia's losing bid, also a cash-and-shares offer, valued GVT at 7 billion euros, including 1.7 billion euros in cash, a 16 percent stake in Telecom Italia and a 15 percent stake in the new Brazilian entity.

It needs GVT to shore up its Brazilian mobile operator Tim Participações that has no fixed network, and also to ward off a potential bid from local rival Grupo Oi , which wants to split up Tim between itself, Mexico's America Movil and Telefonica.

A slowdown in Brazil's mobile phone market is forcing the major players in the region to chase higher-value customers through the sort of pay-TV and broadband services that GVT has pioneered in Brazil, a large cash-generating market for both Telefonica and Telecom Italia.

(1 US dollar = 0.7573 euro)

(1 US dollar = 0.7590 euro)

(Reporting by Tracy Rucinski in Madrid and Gwenaelle Barzic in Paris; editing by Tom Pfeiffer and Andrew Callus)

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