Oi, the Brazilian integrated operator, is preparing to bid for a majority stake in rival TIM Participacoes, as consolidation in the country remains on the cards.
Rio-based Oi said it has asked Banco PTG Pactual SA to review options “with the purpose of enabling a viable proposal for the acquisition of the shares of TIM” indirectly held by Telecom Italia (TI).
TI owns 67 per cent of TIM, which has a market value of $12 billion. Meanwhile Oi has a market value of $5 billion.
Oi could face a rival in the form of Vodafone, which was linked with acquiring a Brazilian operator last week, with TIM thought to be its favoured target.
It was previously reported that Oi was working with Telefonica on a plan to break up TIM’s assets and divide them among the country’s players.
Brazil’s competition regulator requires Telefonica to either end its interest in TIM (via its stake in TI), or to find a new partner for its Vivo mobile business in Brazil.
With TI opposing a break-up of TIM, Telefonica made a €6.7 billion offer earlier this month to acquire fixed operator GVT, currently owned by French media group Vivendi.
Telefonica’s offer for GVT also includes the transfer of its 8.3 per cent stake in TI to Vivendi.
Further complicating matters, Telecom Italia is reported to have decided on a €7 billion bid which would involve Vivendi taking a stake of between 15 and 20 per cent in the Italian incumbent. Telefonica’s board is believed to be mulling an improved bid.
With Telefonica and TI both wanting to add GVT to their businesses, Oi will want to ensure it does not end up as a minor player.
Oi is currently in the process of merging with Portugal Telecom, a move motivated by the need to compete more effectively in Brazil and increase efficiency as it wrestles with a sizeable debt.
Oi could become an acquisition target itself if it fails to secure 4G spectrum in the forthcoming Brazilian airwave auction. Analysts believe it could skip the auction due to limitations imposed by its debt.