Telecom Italia-owned TIM Brasil has mandated local bank Banco Bradesco to review a potential bid for rival Oi, according to multiple reports.
Last month, it had been reported that the Italian incumbent had contacted advisers to work on a bid for…
Telecom Italia-owned TIM Brasil has mandated local bank Banco Bradesco to review a potential bid for rival Oi, according to multiple reports.
Last month, it had been reported that the Italian incumbent had contacted advisers to work on a bid for Brazil’s fourth-largest mobile operator Oi, which has a market value of R$14.2bn (US$6.1bn), via its Brazilian unit.
At the time, TIM, which is the country’s second-largest operator, had issued a statement saying that Telecom Italia had informed it there were no ongoing discussions regarding a possible deal with Oi.
Meanwhile, Oi mandated BTG Pactual in late August to advise it on the potential acquisition of TI’s 67% stake in TIM, which is worth an estimated US$8bn.
However, some analysts are sceptical about potential consolidation deals in the Brazilian market.
“The Brazilian government, as many governments, believes there is too little competition in Brazil and so has long wanted a fifth operator. It is, therefore, unhappy about operator moves to consolidate,” Wally Swain, senior vice president at research firm Yankee Group told TelecomFinance.
“The recent spectrum auction may have shown it that a new player is unlikely but since they are somewhat trapped in their own rhetoric about industry structure, they will still resist/block consolidation,” he added.
Brazil’s recent 4G auction raised US$2.4bn, less than the US$3.2bn expected, after both Oi and its smaller rival Nextel Brasil declined to take part. Overall, four operators took part: the country’s three main operators, Vivo, TIM, and Claro, and regional operator Algar Telecom.
Acquiring Oi would allow the Italian incumbent to scale up its Brazilian operations and better prepare it to face competition from rival Telefonica, which in August outbid it in the race to acquire Vivendi’s Brazilian broadband unit GVT.
Swain believes that the only scenario that might gain approval would be one where − whoever the buy or seller might be − a large degree of control remained with Oi, which is the country’s national champion.
In his view, TIM’s position as either a buyer or a seller is intimately entangled with potential bids for its parent Telecom Italia, which would also need to be recapitalised in order for its Brazilian unit to be able to finance an acquisition deal.
TIM and Bradesco declined to comment.
