A European Union court on Thursday ruled the Portuguese government's golden share in Portugal Telecom, SGPS SA (PT) is illegal. Portugal Telecom has a 50% shareholding in Brasilcel, which in turn holds a 60% stake in Brazilian wireless operator Vivo Participacoes SA, over which Portugal Telecom and Spanish telecommunications giant Telefónica SA (TEF,TDE.L) have been locked in a power struggle. Telefonica's campaign to acquire Vivo, which it manages jointly with Portugal Telecom is expected to get a boost with the court's ruling.
According to the ruling by the Court of Justice of the European Union, the Portuguese government's holding of golden shares in Portugal Telecom or PT restricts the free movement of capital. The panel of judges said the golden shares gives the Portuguese government influence over decision making in the company, discouraging investments from operators in other European Union countries.
The court's directive follows longstanding efforts by antitrust officials in the European Commission to stop Portugal and other governments from using golden shares to block takeovers on the grounds of national interest.
If Portugal does not comply with the ruling within about three months, the commission can launch an infringement case against it, which could result in high daily fines until Portugal gives up its golden share.
PT was created in 1994 following the restructuring of the Portuguese telecommunications sector. As of 1995, the company was privatized in five successive phases. Under Portuguese legislation on privatization, the articles of association provide for golden shares which are intended to remain the State's property.
Irrespective of their number, golden shares gave the State a right of veto over amendments to the company's articles of association and over other decisions in a particular field.
PT's articles of association were adopted in 1995, at a time when the Portuguese State held 54.2% of the share capital. It provides share capital made up of about a billion ordinary shares and 500 state-owned special or golden shares. Certain privileges were attached to the golden shares, in the form of special rights. Following its privatization, all of the public shareholdings in PT were sold, except for the 500 golden shares.
Portugal used its golden share as recently as June 30 to hinder Telefónica's Euro 7.15 billion or $9.04 billion bid to buy Portugal Telecom's stake in Vivo, its Brazilian mobile joint venture, even though about 74% of PT shareholders voted in favor of a deal.
Now, as a result of the ruling, Telefónica's bid may go through. PT and Telefónica have been vying for Vivo, as both companies are increasingly dependent on emerging economies such as Brazil, where low mobile-penetration rates makes it easier to pick up new wireless customers.
On July 7, Telefónica again offered to acquire 50% of PT shares in Brasilcel, N.V., the company that owns about 60% of Vivo, for about Euro 7.15 billion. The offer is valid until July 16. An earlier offer was rejected at the Portugal Telecom General Meeting that took place on June 30 because of the the 500 class A shares vote that represents special rights for the Portuguese Government.
Earlier in June, Telefónica had raised its offer to acquire PT's 50% shareholding in Brasilcel to Euro 6.5 billion from the earlier offer of Euro 5.7 billion with the bid set to expire on June 30. The sweetened offer for Brasilcel came after the earlier offer was rejected by PT. At that time, PT's board had said Telefónica's revised offer did not reflect the strategic value of its asset.
TEF is currently trading at $61.74, up $0.23 or 0.37%, on a volume of 543 thousand shares on the NYSE.
PT is currently trading at $10.85, down $0.11 or 1.00%, on a volume of 122 thousand shares on the NYSE.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.