Tag Archives: TIM

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.

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