Spanish and Latin American carrier Telefónica has seen its plans for a convergent offering in Brazil trashed after the Portuguese government blocked its acquisition of Portugal Telecom’s stake in Vivo.

During Wednesday’s general shareholder meeting at Portugal Telecom, a majority (73.9 per cent) of votes were submitted in favour of Telefónica’s acquisition of Portugal Telecom’s stake in Brasilcel, which in turn controls Vivo.

But despite this support, the Portuguese Government stepped in with its so called “golden share” and blocked the transaction.

This development is the latest in a long running battle for control of Vivo. Last week Telefónica sold eight per cent of its ten per cent stake in Portugal Telecom amid fears it would not be allowed to vote as a PT shareholder on the acceptance of its offer to buy PT out of Brasilcel.

Telefónica upped its offer for PT’s 50 per cent stake of Brasilcel from €5.7bn to €6.5bn in early June.

The current stalemate reflects the strategic importance attached to Brazil in general, and Vivo in particular, by both European incumbents. The market had 185.45 million cellular subscribers at the end of Q1 this year, according to data from Informa’s World Cellular Information Service with Vivo accounting for 53.94 million.

Telefónica’s bid to assume control of Vivo is born out of frustration at its inability to execute its favoured multiplay strategy in the Brazilian market. The Spanish firm already has a fixed presence through Telesp, and is keen to merge the two Brazilian operations and take a converged offering to the lucrative enterprise market. Portugal telecom is known to be sceptical of such a move.

The Spanish carrier said Wednesday that it believes that the Government’s veto under the “Golden Share” is illegal under Portuguese law and European Union Law and has extended the period granted to Portugal Telecom to communicate its acceptance of the offer until July 16.