Sunday, July 4, 2010

Treaty of Tordesillas in 1494 - a business split still under discussion for telecom

1494, Spanish and Portuguese kingdoms ruled a dispute about ownership of the new world. Today, Portuguese prime minister wants to make use of its golden share to prevent Telefonica to control Vivo Brazil, the largest telco in the huge - fast emerging - country.

In 1494, "Treaty of Tordesillas" drew a meridian line (Tordesillas meridian) to determine ownership of the new world : Western part to Spain (all known America), Eastern part to Portugal (islands on the way to America). At this time, it was unknown that South-American territory was extending eastern this meridian line. In 1500, only 6 years later, Cabral, Portuguese navigator, discovered eastern part of Brazil, de facto becoming part of Portugal according to the famous treaty. From this presence in Eastern Brazil, Portugal extended his territory to take more than 50% of South-America.

In 2010, Vivo is the largest telco in Brazil. Through a JV, Telefonica and Portugal Telecom control major part of Vivo. Both Iberian telcos struggle with declining revenues in their home country and consider Brazil as the way for growth. Last week, Telefonica made an offer to buy shares of Portugal Telecom in this JV. Portuguese government now wants to make use of its golden share to protect interests of Portugal.

Spain still has to pay today for an error of about 12° longitude, 500 years ago. When drawing a line to share territories in a fast evolving business, you never know how, where and when it will end ... In ICT, business agreements and M&A operations are often handled much too fast, under immediate market pressure, without clear understanding of the consequences, especially since a lot of new territories are still to be discovered in this domain. What will happen in ICT world 2016 ?

To be continued ...

Benoit Quirynen

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