Game of phones: battle lines drawn ahead of USD15bn TIM Brasil carve-up

11 Dec 2014

Mobile trio Oi SA, Telefonica Brasil (Vivo) and Claro Brasil are planning to make a concrete BRL40 million (USD15.4 billion) offer for TIM Participacoes (TIM Brasil), Bloomberg reports, citing sources familiar with the matter. The offer to buy Rio de Janeiro-based TIM Brasil, which is 67% owned by Telecom Italia (TI), will be made by Grupo BTG Pactual, which Oi has enlisted as a ‘merchant commissioner’ to create the type of special investment vehicle that has been used in the past to break up companies among multiple buyers.

Cash-strapped Oi – the smallest of the four cellcos in terms of subscribers – has found itself under intense pressure as local M&A speculation has gathered momentum in recent months, but the company this week agreed to sell its Portuguese ‘PT Portugal Telecom SGPS’ (PT Portugal) business to Altice Group for EUR7.4 billion (USD9.2 billion), a move which will effectively bankroll its involvement in the carve-up of TIM Brasil.

As previously reported by TeleGeography’s CommsUpdate, in late October 2014 local media reports suggested that the aforementioned trio had agreed to place a bid for TIM Brasil. While the accord between the three companies had not been finalised at that stage, the telcos had reportedly agreed in principle to pay BRL31.5 billion for TIM, a price which represented a 5% premium on its then-share price. Under the terms set out by the initial agreement, Claro would retain 40% of TIM Brasil’s business, with Oi taking 28% and Telefonica securing the remaining 32%.