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Negotiations continue on PT/Oi stake in Unitel; target price ‘USD2bn’, sources claim

1 Sep 2014

Brazilian telecoms operator Oi, which is in the process of merging with Portugal Telecom (PT), is in talks to sell a 25% stake in Angola’s leading cellco Unitel to other shareholders for ‘more than USD2 billion’, according to people familiar with the matter quoted by Bloomberg, contrasting with other recent reports estimating that the Portuguese/Brazilian group would expect roughly USD1.3 billion in sale proceeds. Angolan business tycoon (and Unitel board member) Isabel dos Santos and other shareholders including Angolan state-owned oil company Sonangol are among the possible buyers according to the anonymous sources, who added that Grupo BTG Pactual, one of Oi’s largest shareholders, is an adviser on the sale process. Oi effectively entered the indirect ownership of Unitel when PT contributed its assets in a May capital increase as part of the planned Oi-PT merger. Isabel dos Santos and other Angolan shareholders have claimed that a transfer of PT’s shareholding in Unitel triggers fellow shareholders’ right of first refusal over the foreign-owned 25%, although PT has disputed that assertion. According to a filing from Oi, the book value of the Unitel minority stake was EUR494.3 million (USD652.1 million) at the end of last year, not including accounts receivable from Unitel of EUR238.2 million mainly for unpaid dividends, while the stake is assigned a ‘fair-market value’ of around USD1.8 billion in Oi’s company financial reports. However, PT/Oi’s effective stake is 18.75%, as the 25% Unitel interest is owned via holding company Africatel, a 75%-owned PT subsidiary (while a Nigerian fund bought 25% of Africatel in 2007, giving it 6.25% in Unitel), theoretically placing the value at closer to USD1.3 billion.

None of the parties named in the Bloomberg report were willing to comment on the potential sale process, although two of the anonymous sources agreed that BTG is keen to see Oi partner Telefonica Brasil (Vivo) and America Movil-backed Claro Brasil in a mooted joint purchase and breakup of rival TIM Brasil, inferring that the Angolan deal is linked to this strategy. Espirito Santo Investment Bank added in a research note that a sale of the Unitel stake would be ‘a possible way to finance an offer for TIM Brasil and it would also clear doubts over the capacity of the company to monetise this asset.’ As reported last week by CommsUpdate, Oi has instructed BTG to review its options ‘with the purpose of enabling a viable proposal for the acquisition of the shares of TIM’.

Angola, Brazil, Oi, Pharol (formerly Portugal Telecom SGPS [PT SGPS]), Unitel (Angola)

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