Tag Archives: Telecom

Brazil Says Any Oi-TIM Deal Would Be Studied Closely

The Brazilian government would study any potential merger or acquisition agreement between telephone companies Oi SA and TIM Participações SA closely to avoid too much concentration in the sector, Communications Minister André Figueiredo said Tuesday.Oi announced Monday that LetterOne, an investment firm led by Russian billionaire Mikhail Fridman, is planning to invest $4 billion in the Brazilian phone company. The offer is conditioned on the success of a potential merger with TIM Participações SA, the Brazilian unit of Telecom Italia SpA, Oi said. TIM Participações said Monday that there are no talks with LetterOne or Oi about a possible merger or acquisition.

“The Brazilian government will follow with attention the case announced by Oi about TIM,” Mr. Figueiredo said at a conference. “We’ll only comment when we’ve been formally informed by the company.”

Oi has 35% of Brazil’s fixed-line telephone market, but it fell behind rivals in the mobile race and has been trying to make up ground while cutting its heavy debt load. Mobile operator TIM doesn’t have a relevant position in the fixed-phone and broadband markets, according to analysts.

Later, at the same conference, Telecom Italia Chief Executive Officer Marco Patuano said a combination of TIM Participações with Oi would be “one of the options,” but added that all the telecom companies in Brazil are in need of more investment.

In the second quarter, the most-recent figure available, Oi’s net debt totaled 34.64 billion reais (about $8.9 billion), while its net revenue in the period totaled 6.78 billion reais.

When asked about Oi’s debt level, Mr. Figueiredo said the government might help the company if necessary.

“Nothing has been ruled out,” he said. “We know how important Oi is, though that doesn’t necessarily mean the government will inject cash directly into the company.”

Meanwhile, Oi said that it is working to improve its performance.

“We are engaged in the improvement of our balance sheet and in the improvement of our debt profile, in order to prepare the company to participate in the consolidation process of the telecom industry in Brazil,” said Oi CEO Bayard Gontijo to The Wall Street Journal, before his participation in an event in São Paulo.

Shares of Oi and TIM Participações fell mid-Tuesday, after being the Ibovespa stocks index’s biggest and second-biggest gainers, respectively, on Monday. Oi recently was down 3.7%, to 3.37 reais, and TIM Participações was down 8.2%, to 7.87 reais. The Ibovespa was down 0.7%.

Mikhail Fridman Proposes $4 Billion Investment in Oi of Brazil

The Russian oligarch Mikhail Fridman may spend as much as $4 billion to expand his telecommunication holdings into South America.On Monday, the Brazilian telecommunications company Oi said that Mr. Fridman’s investment group, LetterOne, had given it a proposal to invest in a possible merger of Oi with Telecom Italia’s local operator, TIM Participações.

“In accordance with LetterOne’s proposal, sent by BTG Pactual to Oi’s management and board, LetterOne would be willing to invest as much as $4 billion in Oi, conditioned on the operation of consolidation (with TIM),” Oi said in a statement. The company said that it would “analyze” the offer.

Because Oi’s market value is about $650 million, Mr. Fridman’s investment would presumably give him control of Oi’s stake in any merged company, but Oi’s statement also said that any deal “would not represent an economic dilution of shareholders.”

Mr. Fridman became one of the world’s richest men after selling his stake in joint oil venture TNK-BP to Rosneft in 2013 . He also recently sold energy assets in Britain.

Through LetterOne Mr. Fridman already own stakes in two telecom companies: VimpelCom, based in Amsterdam, and Turkcell in Turkey. LetterOne said in April that it was planning to spend up to $16 billion on telecom acquisitions.

Oi hired the Brazilian investment bank BTG Pactual last year to look for a way to merge with TIM Participações. At the time, BTG stitched together a $14 billion deal in which Oi would have joined forces with Telefónica of Spain and América Móvil of Mexico to carve up TIM Participações, but the deal fell through as Telecom Italia decided to maintain its presence in Brazil.

Since then, Brazil’s economy and TIM Participações’ business model have deteriorated.

The company’s revenue is falling, its cash flow is negative, and it has lost about a third of its value on the São Paulo stock exchange over the last year.

For Oi, Mr. Fridman’s cash might be a way out of a mountain of debt.

The company, saddled with a merger with Portugal Telecom, has $13 billion in gross debt and this year had to request a waiver on loan covenants with its banks.

But it is far from certain that Mr. Fridman’s offer will indeed lead to a merger.

Jonathan Dann, telecommunications analyst with RBC Capital Markets in London, said that even though a merger between Oi and TIM Participações would have an “industry logic,” it was not clear how a deal could simultaneously reduce Oi’s debt, keep Oi’s shareholders from suffering dilution and meet Telecom Italia’s likely need for either a large cash payment or control of the new company.

“This will be a very challenging deal to structure,” Mr. Dann said.

In statement, TIM Participações said that no negotiations were currently underway with either Oi or LetterOne about a possible merger.

Telecom Italia may exit Brazil and towers, as deep review continues

Telecom Italia continues to go through the painful process of adjusting to the modern world, facing recessionary pressures at home and in its former growth engine in Brazil.

Italy has been suffering from the Eurozone recession since the 2008 crash, and this has helped make Telecom Italia (TI) the center of persistent takeover rumors. It is engaged in a major strategic review, which could lead it to be the first major European incumbent to break up. In the shorter term, however, it is looking for smaller deals to improve its cash and debt position, including the sale of its towers and a possible exit from Brazil.

The firm says it is seeing “strong interest” in its tower company, Inwit, which operates about 11,500 sites plus backhaul links. In June, TI raised about €875m in an IPO of 40% of Inwit, giving the whole business a market value of €2.4bn. TI CEO Marco Patuano said this week that the telco had “built a company that is financially very light to keep our hands free and able to move in all directions”, but added that there were no firm offers yet on the table.

TI will discuss the options for Inwit – which include mergers with other tower operators in the region to create pan-European scale – at its board meeting this week. However, one of the largest European towercos, Cellnex (which was itself floated by Spanish telco Abertis), denied speculation that it would make a bid, even though it already has Italian assets, and has said it aims to be the “American Tower of Europe”.

Patuano has said TI will be a “key player” in consolidating passive infrastructure in Italy, as part of the broader global trend for operators to divest their towers and other sites, to improve their cost efficiencies. That, in turn, is leading to the formation of powerful towercos with consolidated national or international portfolios, which either be joint ventures between the carriers (as in China), or fully independent (like Cellnex, American Tower or the UK’s Arqiva).

Wind already sold its towers last year, to Cellnex, netting €693m for a 90% stake in the unit, which controls 7,377 sites.

Last year, TI divested 6,481 towers owned by its Brazilian subsidiary TIM Participacoes, in a $900m deal with American Tower. Now it may consider more radical moves in Brazil, whose status as a mobile goldmine has been destroyed by the huge country’s deepest recession for 25 years.

Against that backdrop Patuano says TI will review its strategic plan for TIM Participacoes, Brazil’s second largest operator, in which the Italian telco holds a two-thirds stake. Brazil generates about 30% of TI’s revenues but Patuano told Bloomberg, ahead of the board meeting, that his firm was “focused at the moment on organic investments, but we need to review the strategic plan since the situation in Brazil worsened a lot”.

In February, TI unveiled plans to increase its investment in Brazil and plough BRL14bn ($3.6bn) into LTE expansion as well as 3G coverage improvement. It said it would create a footprint of 15,000 4G and 14,000 3G sites by 2017. Some of that spending may now be reduced, though TI stressed that it would make most of its investments in US dollars to protect itself from the impact of the crash in value of the Brazilian real.

The investment plans were seen as a strong sign that TI aimed to stay in Brazil, even though it was widely expected to exit after it lost out to Telefonica in the race to acquire GVT – and with that failure, lost the chance to gain fixed-line and TV assets and mount a future quad play.
TI insisted that TIM Brasil remained strategic, and went on to explore an acquisition of the fourth MNO, Oi, to improve its mobile scale and add some fixed lines. However, it may be reviewing the future of its Brazilian activities again.

All this is part of an overall and ongoing review, which will affect the home market too, although the economic situation is now improving in Italy, expanding TI’s options. In June, French media giant Vivendi became its largest shareholder, replacing Telefonica. Vivendi sold its telecoms interests last year, including its stake in SFR in France, but its chairman Vincent Bollore could now be a kingmaker in the consolidation of the Italian market, where Wind and 3 Italia are also looking to merge. That would create a stronger third rival to TI’s TIM mobile operator and to Vodafone, but may be blocked by regulators because it reduces the number of MNOs.

Apple’s main rival, the Chinese Xiaomi arrives in Brazil with smartphones at R$ 499 (aprox. US$ 160)

Chinese giant Xiaomi finally landed in Brazil. After suggestive pictures on Facebook and suspense, the company announced on Tuesday (30) that it has begun to sell: the Redmi 2 smartphone, the activities monitor Mi Band and the PowerBank super charger.

The smartphone is the flagship: direct competitor of the iPhone 6, the Redmi has 4.7-inch screen, the operating system Miui 6 – based on Android – the Snapdragon 410 processor (the same as the Galaxy Duos A5), and 8GB of memory; as technical differential, the device is the first to have support for 4G Dual Sim – that is, one can use 4G in two chips from different operators.

Xiaomi_Redmi_2_4G_LTE_Dual_Sim_Snapdragon_410_Quad_Core_1GB_8GB_4.7inch_IPS_Smartphone1420340807What draws attention in addition to the technical characteristics, is the price. R$ 499 per smartphone – compared to R$ 3,200 for the 16GB iPhone 6. According to Hugo Barra, vice president of Xiaomi, this is one of the company’s traditions: to offer quality at a fair price.

The phone is available in several colors and, at first, will be sold only via the mi.com website from July 7. Pre-sale is available since today.

The Mi Band, in turn, is a bracelet that monitors user activities, including their sleep.

Finally, the third product to be sold in Brazil, the Mi Power Bank is an energy bank, famous 10400 mA “portable charger”, capable of charging the Redmi 2 up to 3.5 times without having to be connected to a source.

For now, the smartphone is the only product of the company manufactured in Brazil, in the city of Jundiaí. The other products still come from imports and will also be sold through the website, on the same dates.

TIM Brazil Launches Pay TV Offer

TIM Brazil yesterday launched a device that will integrate free digital TV content, Netflix, YouTube and TV pay by TV Alphaville. The new device, called Live TIM Blue Box, is a company’s bet in offering pay TV content and get closer to the offering of the other major carriers – Oi, Telefonica and Claro (the Mexican group America Movil, which also owns the Net) – The trio has been offering pay TV in the Brazilian market for four years. TIM will not buy content, such as its competitors, but will work with partnerships.

Read more about the Brazilian Telecom Market

CADE rejects Telefónica and Telecom Italia merge. Vodafone is arriving in Brazil?

Brazilian antitrust authority,  Administrative Council for Economic Defense (Cade) rejected Telefónica’s (TEF) embargoes and kept the fine of BRL 15 million that was imposed on the company for breach of the agreement signed in 2010, by which it should stay away from TIM (TSU), controlled by Telecom Italia (TI).

Official Announcement

With the negative for the embargoes, Telefónica must appeal of the decision. Therefore, it is necessary to wait for the posting in the “Diário Official”, the official newspaper.

The fine was imposed against Telefónica on December 4th, 2013, when the antitrust authority imposed conditions when judging the acquisition by the Company of shares of Telco, holding that controls Telecom Italia.

According to Cade, Telefónica will have to choose between seeking a new partner in Vivo (VIV), who would be entitled to have 50% of the control in this company, or selling the stakes it acquired in TIM through the purchase of shares of Telco.

Rumors have that Vodafone (VOD), who recently started operating in Brazil via enterprise services, is looking to expand into the consumer market and is interested in acquiring a stake in TIM, since it’s very unlikely that Telefónica would let got of the control on Vivo.

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