A customer sits beneath an illuminated logo as he waits to be served inside a TIM store, the mobile phone unit of Telecom Italia, in Milan. Telecom Italia directors have authorised the company to explore a potential transaction between its Brazilian unit Tim Participacoes and Oi.
Bloomberg
Telecom Italia directors authorised the company to explore a potential transaction between its Brazilian unit Tim Participacoes and smaller rival Oi, a deal that would shake the country’s wireless market.
The board of directors has “empowered management to examine in depth the options for a possible integration” of Tim and Oi, the Milan-based carrier said in a statement after its board met on Saturday in Rome. “The next steps, if there are to be any, will be submitted to the board for approval, following the opinion of the committee of independent directors,” Telecom Italia said.
Tim and Oi combined would be the largest mobile carrier in Brazil by subscribers, surpassing Telefonica SA’s local unit. A combination with Oi would strengthen Telecom Italia in Latin America’s largest telecommunications market, helping it offset falling revenue in Italy amid a price war.
Conditions for any deal with Tim, Brazil’s second-largest mobile-phone company that’s 67% owned by Telecom Italia, include access to Oi’s financial accounts and that Tim would have a controlling stake in any enlarged entity, people familiar with the matter have said. Milan-based Telecom Italia also wants Brazilian state lender Banco Nacional do Desenvolvimento to have a role in a transaction, people have said.
Bloomberg News reported this week, citing people familiar with the matter, that the company’s management was seeking a mandate to explore the deal.
Oi rose 7.8% to 1.52 reais in Sao Paulo on Saturday, valuing Brazil’s largest landline provider and fourth-biggest wireless provider at $5.3bn. Rio de Janeiro-based Oi has more than $18bn in debt. Tim fell 2.9% to 12.57 reais for a market capitalisation of $12.1bn.
Telecom Italia chief executive officer Marco Patuano also informed the board of a proposal sent to F2i SGR, formalising the company’s interest in starting discussions about acquiring a controlling stake in fiber-optic carrier Metroweb as soon as possible.
Comments in the past weeks by Telecom Italia and Oi executives showed the companies may be willing to negotiate a merger in Brazil. Bayard Gontijo, Oi’s interim CEO, when asked last week whether Oi could merge with Tim, said his “objective is to create shareholder value” and he “won’t have any prejudice in how we’re going to do that.”
Earlier this month, Patuano said while keeping the Brazilian business remains the preferred option, the carrier would look at “any good opportunities” in the country.
Patuano is focused on boosting revenue and profitability in Brazil, the company’s second-largest market, after former shareholder Telefonica beat Telecom Italia to acquire Vivendi’s Brazilian broadband unit GVT for about €7bn ($8.8bn).
Tim and Oi combined would have 126mn customers, or about 45% of the Brazil’s wireless market, surpassing market leader Telefonica Brasil, which operates the Vivo brand, according to September data compiled by the Anatel regulator.
“You have to expect that the board will confirm Brazil is core and we’re willing to invest in infrastructure as well,” Patuano said this week in an interview in Rome.
At an investor conference in Barcelona this week, Telefonica chief financial officer Angel Vila said the Spanish carrier is prepared to take part in further consolidation in Brazil.
Tim’s board, which also met on Saturday, approved the sale of almost 6,500 mobile-phone towers in Brazil to American Tower Corp for about 3bn reais ($1.2bn), Telecom Italia said.
Goldman Sachs Group Inc-backed Cell Site Solutions Cessao de Infraestruturas and American Tower were among potential buyers, people familiar with the matter said in May. Telecom Italia, which was working with Morgan Stanley to sell the assets, valued them at about $1bn, one of the people said in May.
