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Oi accepts bid from LetterOne and will seek a merger with TIM > EXAME (Brazil)

When Lula jokes that it took a leftist to create the conditions for Brazilian capitalism, he might well have had the telecom sector in mind.

Strategic goal: create Brazil-domiciled multinationals, like Odebrecht — the engineering giant for whom Lula has lobbyed since leaving office.

It will be interesting to see how the CVM — the Brazilian SEC — and ANATEL,  the Brazilian FCC, respond to this transaction. As Reuters explains:

It is still unclear whether Telecom Italia is open to a tie-up and whether Brazilian antitrust authorities would approve it.


São Paulo – Oi confirmed this Friday (October 30) that it has accepted a proposed bid of as much as US$4 billion from the (Russian) LetterOne Group to underwrite a merger between Oi and TIM. In a material event statement published by the Brazilian securities regulator, CVM, the telephone operator said it has signed an exclusive contract with the Russian company regard potential synergies among companies or assets in Brazil. The accord will last seven months, counting from October 23. In the communique, Oi said it expects to reduce its leverage and profit from synergies on a broad scale should the association with its competitor take place.

 … In this category in Brazil. TIM occupies the second position, with 73 million clients, according to research performed by Anatel. The potential merger of Oi with TIM Holdings should create a more complete, better positioned operator, capable of competing with global players already present in the Brazilian market. The consumer, it is said, will benefit from the subsequent reinforcement of the company,” according to the communique. The proposal by the billionaire Mikhail Fridman of LetterOne was reported by Oi on October 26.

A more complete Lusophone deal analysis is this, from the Portugeuse Jornal de Negócios.

The specialty dealbook TeleSíntese provides background on market share according to a market analysis performed  by Anatel.

Oi has 51 million mobile telephony users and ranks fourth. Vivo, serves 81 million customers. There would also synergies in fixed line telephony, a market which Oi leads with 15.5 million lines. TIM has 567 thousand fixed-line subscribers. In fixed line broadband, Oi is second-ranked, with 6.4 million access points, outranked only by Claro Participações (controller of NET), with its 7,9 million.  TIM owns 206 thousand fixed line broadband.

The  LetterOne fund specializes in energy and IT investments, and belongs to the Russian billionaire Mihkail Fridman, whose previous investments include Turkcell and the Dutch Vimpelcom

It appears that these investments might be termed troubled.

TIM is quoted as saying that regulatory changes (Anatel) will be necessary for its participation.