The CEO of Telecom Italia has said there needs to be clarity around fixed-line concessions before any merger of its Brazilian subsidiary TIM Participações with Oi can be discussed.
The CEO of Telecom Italia (BIT:TIT) has said there needs to be clarity around fixed-line concessions before any merger of its Brazilian subsidiary TIM Participações (BVMF:TIMP3) with Oi (BVMF:OIBR4) can be discussed.
Marco Patuano’s comments followed Oi revealing that it had received a proposal by Russian fund Letter One, backed by Mikhail Fridman, to invest US$4bn into Oi to facilitate a tie-up with TIM.
Oi has a nationwide fixed-line network which was inherited when former telecoms monopoly Telebras broke up, but there is uncertainty around the future terms of the concession, which could impact upon the rationale for an Oi-TIM combination.
Patuano reiterated Telecom Italia’s commitment to the Brazilian market, while also telling local newspaper Valor that he was open to discussing an industrial cooperation with Letter One.
Valor cited one source as suggesting both Telecom Italia and Letter One could end up with 35% stakes in a combined Oi-TIM, but another source disagreed and said, given TIM’s greater value, the Italian telco would be the controlling shareholder.
The report added that Oi’s board could approve Letter One’s proposal this week and a pitch to Telecom Italia could come before the end of November.
Telecom Italia and Letter One declined to comment on the report.
A combination of Oi and TIM, which would reduce the number of nationwide Brazilian carriers from four to three, has been touted for years. The two operators already have a network sharing agreement.
Oi engaged BTG Pactual to explore a deal last year and the São Paulo-based bank has continued to offer the company strategic advice. BTG Pactual was tasked by Oi to develop viable structuring and financing alternatives to enable it to participate in consolidation without diluting the interests of current shareholders. It is not clear whether Letter One’s approach would see existing investors’ shares diluted.