Page 50 - 2012 Annual Report

VIVENDI l 2012 l Annual Report 50
GROUP PROFILE – BUSINESSES – LITIGATION – RISK FACTORS 1
1
SECTION 3 - LITIGATION
DYNAMO AGAINST VIVENDI
On August 24, 2011, the Dynamo investment funds filed a complaint for
damages against Vivendi before the Bovespa Arbitration Chamber (São
Paulo stock exchange). According to Dynamo, a former shareholder of GVT
that sold the vast majority of its stake in the company before November 13,
2009 (the date on which Vivendi took control of GVT), the provision in
GVT’s bylaws providing for an increase in the per share purchase price
when the 15% threshold is crossed (the “poison pill provision”) should
allegedly have applied to the acquisition by Vivendi. Vivendi, noting that
this poison pill provision was waived by a GVT General Shareholders’
Meeting in the event of an acquisition by Vivendi or Telefonica, denies all
of Dynamo’s allegations.
HEDGING-GRIFFO AGAINST VIVENDI
On September 4, 2012, Hedging-Griffo filed a complaint against Vivendi
before the Arbitration Chamber of the Bovespa (São Paulo Stock Exchange)
seeking to obtain damages for losses they allegedly incurred due to the
conditions under which Vivendi completed the acquisition of GVT in 2009.
Hedging-Griffo demanded compensation for the difference between the
price at which they sold their GVT shares on the market and the price paid
by Vivendi in connection with the tender offer for the GVT shares. Vivendi
believes that the decision taken by the Hedging-Griffo funds to sell their
GVT shares before the end of the stock market battle that opposed Vivendi
against Telephonica was their own decision made in the context of their
management of these funds and can in no way be attributable to Vivendi.
ACTIONS RELATED TO THE ICMS TAX
GVT is party in several Brazilian States to various proceedings concerning
the application of the “ICMS” tax Impostors Sober Circulaçãos de
Mercadorias e Prestaçãos de Serviços (ICMS) is a tax on operations
relating to the circulation of goods and the supply of transport,
communication and electricity services.
On August 5, 2011, Confaz, the national council in charge of coordinating
the tax policies of the Brazilian States, published a draft proposal allowing
GVT, as well as all other companies that dispute the application of ICMS
on Internet and Broadband services, to enter into negotiations with the
objective of settling the past disputes and clarifying the rules for the
future. As of today, GVT has reached agreement with all of the states in
which it operates with the exception of Rio de Janeiro.
In addition, GVT is a party to litigation in various Brazilian States
concerning the application of the ICMS tax on voice telecommunication
services. GVT argues that the ICMS tax should not apply to monthly plans.
Of the 20 proceedings initiated by GVT, 18 have resulted in decisions
favorable to GVT and 12 are no longer subject to appeal.
ACTION RELATED TO THE FUST AND FUNTTEL TAXES IN BRAZIL
The Brazilian tax authorities argue that the assessment of the taxes known
as “FUST” (Fundo da Universalizaçãos dos Serviços de Telecomunicaçõs ),
a federal tax to promote the supply of telecommunications services
throughout the whole Brazilian territory, including in areas that are not
economically viable, and “FUNTTEL” (Fundo para Desenvolvimento
Tecnológioco das Telecomunicações), a federal tax to finance technological
investments in Brazilian telecommunications services, should be based
on the company’s gross revenue without deduction for price reductions
or interconnection expenses and other taxes, which would lead to part
of that sum being subject to double taxation. GVT is challenging this
interpretation and has secured a suspension of payment of the sums
claimed by the tax authority from the federal judge.
PROCEEDINGS BROUGHT AGAINST TELECOMMUNICATIONS
OPERATORS IN BRAZIL REGARDING THE APPLICATION
OF THE PIS AND COFINS TAXES
Several proceedings were initiated against all the telecommunications
operators in Brazil, including GVT, seeking to prevent invoices from
being increased by taxes known as “PIS” (Programa de Integraçãos
Social) and “COFINS” (Contribuição para Financiamento da Seguridade
Social), which are federal taxes that apply to revenue from the provision
of telecommunications services. GVT believes that the arguments in its
defense have a stronger basis than those of the historic operators insofar
as GVT operates pursuant to a more flexible license that allows it to set
its own tariffs.