Brazilian carve-up on the cards as AM, Telefonica, Oi prepare joint bid for TIM Brasil

3 Nov 2014

Mexico’s America Movil (AM), Spain’s Telefonica and Brazil’s Grupo Oi have reportedly agreed to place a bid for and to break up TIM Participacoes (TIM Brasil), local news site Folha de Sao Paulo reported on Friday, without saying how it obtained the information. According to the story, which was picked up by Reuters Latin America, while the accord between the three companies has not been finalised, the telcos have agreed in principle to pay BRL31.5 billion (USD12.7 billion) for TIM Brasil, a price which represents a 5% premium on the current share price.

Under the terms set out by the deal, AM will retain 40% of TIM Brasil’s business, with Oi taking 28% and Telefonica securing the remaining 32%. AM is active in Brazil through Claro Brasil (which is in the process of merging with majority-owned fixed line units Embratel and NET Servicos), while Telefonica owns Vivo, and Oi operates as a full-service telco under its own name.

According to the newspaper, the talks progressed after TIM Brasil’s majority owner, Telecom Italia (TI), recently proposed to merge TIM Brasil with Oi, a plan which ultimately failed to move forward. Previously, in August this year Oi hired investment bank Grupo BTG Pactual to look at potential deals in Brazil, including the possible acquisition of TIM Brasil. Indeed, Grupo BTG Pactual is reportedly handling the transaction, and a formal offer is likely to be delivered to TI shareholders in due course.

When questioned on Friday, TI chairman Giuseppe Recchi confirmed that the company had not yet received any offer to sell its Brazilian wireless carrier.