Telecom Italia has told Russian investor LetterOne Technology that it does not want to continue with talks about a potential merger between its Brazilian unit, TIM Brasil and rival Oi. LetterOne, however, said it remains interested in investing in the country, which it considers to have long-term potential.
Telecom Italia (BIT:TIT) has told Russian investor LetterOne Technology (L1 Technology) that it does not want to continue with talks about a potential merger between its Brazilian unit, TIM Brasil (BVMF:TIMP3), and rival Oi (BVMF:OIBR4).
“L1 Technology has been informed by Telecom Italia that, whilst it thanks L1 Technology for its approach, it does not wish to enter into further discussions about the facilitation of a merger between TIM and Oi in Brazil,” the company, backed by Russian billionaire Mikhail Fridman, said in a statement.
L1 noted that, over the past four months, it has “explored proposals to develop viable structuring and financing options that would have enabled Oi to participate in any consolidation with TIM”.
The firm added that there have been “extensive talks” with many stakeholders in Brazil as well as discussions with Telecom Italia, which recently rebranded as TIM.
L1 added that, despite Brazil’s challenging macro environment, it is still interested in investing in the country, which it believes has good long-term growth potential.
Last October, L1 made a US$4bn proposal to Oi, Brazil’s third largest mobile operator and the fixed-line incumbent, that would have seen it merge with TIM Brasil, the number two mobile player. Days later, Oi, which is heavily indebted, announced that it was in exclusive talks with L1 to develop structuring and financing options to enable it to participate in in-country consolidation.
Despite ongoing speculation in the press, Telecom Italia has insisted that it is not looking to sell its controlling stake in TIM Brasil. Commenting on the matter in mid-February, CEO Marco Patuano (pictured) said “there is no discussion”.
“For any deal, all the stars would have to be aligned across regulatory, financial and industrial [issues],” he said, adding that he thinks it’s better for his team to work on “a more delicate [turnaround] strategy”.
Acknowledging that “we are conscious of how delicate the Brazilian situation is economically and politically”, Patuano said the turnaround would be self-financed and that he saw scope for a mobile-only challenger.
A merged TIM Brasil and Oi would become Brazil’s leading mobile operator with a 44% market share. Telefónica Brasil and América Móvil currently hold a respective 29% and 25% of the market.