Telefonica eyes arbitration over PT impasse-report

MADRID, July 13 (Reuters) - Spanish telecoms leader Telefonica will seek international arbitration if it does not reach a deal this week with Portugal Telecom in a tug-of-war over ownership of Brazil's biggest mobile phone company, ABC newspaper said on Tuesday.

Telefonica (TEF.MC) declined to comment on the report, which cited anonymous sources close to Telefonica's board saying the company had hardened its stance after weekend talks with PT (PTC.LS) failed to bear fruit.

The Portuguese government used a golden share two weeks ago to block Telefonica's sweetened 7.15 billion euro ($9.01 billion) offer to buy PT's stake in their Brazilian joint venture Vivo VIVO4.SA.

The European Court of Justice later said the use of the golden share breached European Union rules on the free movement of caital, and both PT and Telefonica then said they were open to discussing solutions.

ABC reported that Telefonica would go to the Permanent Court of Arbitration in The Hague, an institution for the resolution of international disputes, seeking to dissolve its joint venture with PT, Brasilcel, which controls 60 percent of Vivo, if it does not reach a deal with PT by July 16.

According to ABC, the Spanish company's plan is to break up Brasilcel then buy up shares of Vivo on the market until it has control.

Telefonica wants to take over Vivo to merge it with its fixed line company in Brazil, Telesp TLPP4.SA TSP.N, to fend off growing competition in Brazil.

Portugal's government sees PT's stake in Vivo as representing the national interest because it gives the company an international foothold.

(Reporting by Robert Hetz; Editing by David Cowell)