The CEO of Telecom Italia Marco Patuano is reportedly keen for the firm to acquire Brazil’s Oi.
Patuano is slated to propose the motion based on the potential savings to be made by combining Brazilian number two mobile operator TIM with number four Oi, which leads the fixed line market. The savings could range from $7.8 billion to $11.7 billion, although a more exact figure will require further due diligence.
Whether the proposed plan has the backing of TI’s board is not yet known, although board chairman Giuseppe Recchi has proclaimed his opposition to making strategic decisions without due consideration. Telecom Italia is reconsidering its role in Brazil, having announced the sale of its Brazilian towers to American Tower Corp for around $1.1 billion.
TI owns 67% of TIM Participacoes, and attempted to acquire fixed operator GVT earlier this year with the aim of merging the businesses. However, TI’s bid for GVT was beaten by Telefonica, prompting speculation over TIM’s future.
Recent reports suggested Oi, along with Claro and Vivo – owned by America Movil and Telefonica respectively – had agreed to acquire TIM for $13.1 billion and break up its assets between them. However, Oi denied any involvement in a joint bid.
While the Brazilian market is ripe for consolidation, it has for some time been unclear exactly how this will proceed. Mobile growth has slowed, while the increasingly obsolete networks will require substantial investment for upgrades.
TIM was widely tipped as a likely acquisition target, although Patuano has repeatedly cited the unit’s strategic importance as a reason for retaining it. He recently stated that TI must consider buying or merging with Oi in order to provide TIM with a fixed business – it is currently the only national operator that lacks one.
Patuano’s proposal would merge TIM with Oi, granting TI overall control of the combined business. A share sale could provide funding of up to $2.5 billion. Recchi meanwhile is reportedly keener to invest in TIM’s network in order to improve its performance.
There is speculation that if TIM holds off from agreeing a deal, more operators could become interested in buying the unit, with AT&T considered a likely candidate for a buyout.