Brazilian operator Oi said it had entered into a deal with LetterOne concerning an effort to tie-up with TIM in the country, stating that the alliance potentially “enables the consolidation of the sector”.
Earlier this week, LetterOne, the private equity firm that also holds significant stakes in VimpelCom and Turkcell, said it would invest $4 billion into Oi if such a deal was to go ahead. A tie-up between Oi and TIM has long been mooted, but nothing has come to fruition.
Oi outlined a number of benefits from a deal, including a reduction in its leverage, “becoming a more robust player”, and synergy and economy of scale benefits which would create value for shareholders.
“A potential business combination of Oi and TIM Participacoes should result in the creation of a more complete and well-positioned telecommunications operator that would be able to compete against global players already operating in Brazil. Customers should benefit from the resulting strengthening of the Company,” it said.
Oi and LetterOne will now work together exclusively for a period of seven months counted from 23 October, the date the proposal was first made.
Since the deal first came to light, Telecom Italia, parent of TIM, has not made an official comment on an alliance. However, Marco Patuano, its CEO, called for clarity around regulations in the fixed line space ahead of a potential tie-up.
Telecom Italia is also believed to be reviewing its strategic options for the market.