Spain's Telefonica has more than doubled its stake in Portuguese counterpart Portugal Telecom (PT) from 4.75% to 10% as part of a deal that sees the two companies create South America's largest mobile phone operator via a joint venture in Brazil.

The Spanish conglomerate may also take an option to invest in PT's mobile holding company PT Moveis. PT, in turn, may increase its holding in Telefonica to 1.5%.

The 50:50 joint venture, valued at $10bn, will combine all of the two partners' existing mobile phone assets in Brazil, pending approval from regulatory authorities. The collaboration leaves the door open to develop further joint business ventures in Brazil and Latin America.

Together, Telefonica and PT boast 9.3 million mobile customers in Brazil, making the joint venture Latin America's largest. Telefonica will name the chairman and CFO of the new venture, while PT will name the CEO and vice-chairman.