Brazil’s fourth largest mobile operator Oi has enlisted relationship bank BTG Pactual to work on the potential acquisition of Telecom Italia’s 67% holding in TIM Brasil.
In a notice to the market, Oi said BTG Pactual would review alternatives to…
Brazil’s fourth largest mobile operator Oi has enlisted relationship bank BTG Pactual to work on the potential acquisition of Telecom Italia’s 67% holding in TIM Brasil.
In a notice to the market, Oi said BTG Pactual would review alternatives to enable a viable proposal for the acquisition of the stake, which is worth US$8bn based on TIM Brasil’s current US$12.1bn market capitalisation.
Oi’s shares have risen 10% in pre-market trading and Portugal Telecom – which is close to finalising its merger with Oi – experienced a more than 5% increase in its stock price. Meanwhile Telecom Italia’s shares have gone up 3.23% and TIM’s rose 2.3%.
Oi said any move it makes for TIM would have to be approved by telecoms regulator Anatel and antitrust authority Cade. A merger between the two operators would consolidate the market down from four national operators to three.
Oi’s announcement comes as Telefonica, which owns Brazil’s largest operator Vivo, and Telecom Italia are expected to submit rival bids for Vivendi’s Brazilian broadband unit GVT within the next few days.
A merger of GVT and either Vivo or TIM would create a large converged Brazilian player controlling a substantial share of the telecoms market. If TI were to lose to Telefonica, it has been speculated that the Italian incumbent may be prompted to sell TIM.
According to Wally Swain, senior vice president at research firm Yankee Group, Oi has the best chance of the existing operators to take over TIM. But that greater probability does not necessarily mean he thinks it will succeed.
“Any attempt to take TIM out of the market is bound to meet resistance from competition authorities, the telecom regulator and the cabinet. Brazilian government policy is to attract a fifth operator not permit the market to reduce to three.
“And this analysis does not ask the question about whether Telecom Italia is willing to sell the only part of its business which is still growing.”
Swain concluded that the only potential buyer of TIM is Vodafone because it does not change the number of operators.
Vodafone was reported to have met Brazilian officials at the country’s embassy in London at the end of July to discuss potentially entering its mobile market.
The British telco is interested in acquiring an operator in the country and TIM is its preferred target, according to a report in a Sao Paulo newspaper last week. Vodafone declined to comment on the report.
Oi itself has been touted as a potential takeover target. It has been speculated that Brazil’s most indebted mobile player may struggle to raise the funds to bid for frequencies in the country’s 700 MHz spectrum auction in September.
An official at Anatel was quoted saying in July that if an operator cannot afford to participate in the auction, then the market will want to break it up.
