Brazilian operator Oi is gearing up to bid for a majority stake in its rival TIM Participacoes, the local unit of Telecom Italia.
Oi has requested a review by the Banco PTG Pactual SA “with the purpose of enabling a viable proposal for the acquisition of the shares of TIM” that are currently owned indirectly by TI. The Italian group holds a 67% stake in TIM, which is valued at $12 billion. Oi itself is valued at around $5 billion.
The bid will not be plain sailing for Oi, as competition could well emerge in the form of Vodafone. There has been speculation that the British group is interested in a Brazilian buy, with TIM as a likely candidate.
The Brazilian antitrust regulator Cade has ordered Telefonica to divest its interest in TIM (which it holds via its stake in TI), or alternatively find an operating partner for its Brazilian mobile unit Vivo.
Telefonica had the option of breaking up TIM’s assets and distributing them among the other players in the market, but this move was rejected by TI. Oi would have aided in this process, and would have benefited significantly from it.
In addition, Telefonica and TI have both lodged bids for the fixed-line provider GVT. In this context, Oi’s bid for TIM can be seen as an attempt to avoid being sidelined by larger players by increasing its market heft. The group is currently involved in a merger with Portugal Telecom, which was similarly aimed at increasing its competitiveness in Brazil.
Oi is plagued by debt troubles that could see it forced to sit out Brazil’s upcoming auctions of 4G spectrum. Should this occur, the operator could itself become an acquisition target for larger players.