Telecom Italia open to Brazilian merger, but only if it is in the driving seat

5 Nov 2015

Telecom Italia (TIM) is prepared to discuss a deal with Luxembourg-based, Russian-backed LetterOne Holding regarding a proposed merger between its 67%-owned TIM Participacoes (TIM Brasil) unit and rival operator Oi – but only if it can retain control of the combined entity. According to unnamed sources cited by Bloomberg, the Italian operator initially rejected the offer because it assumed LetterOne would want to secure a majority shareholding in the new company, leaving it with a 35% stake. Sources close to the deal, however, have now suggested that LetterOne is not opposed to giving TIM control of the merged companies, increasing the likelihood of a deal.

As previously reported by TeleGeography’s CommsUpdate, last month LetterOne – which owns a controlling 47.9% stake in Vimpelcom of Russia – contacted Oi with a surprise investment proposal. LetterOne, which is ultimately controlled by Russian billionaire Mikhail Fridman offered to inject up to USD4 billion into the Brazilian telco, on the proviso that it merges with domestic rival TIM Brasil. Last week Oi and LetterOne granted each other a mutual right of exclusivity for a period of seven months (commencing 23 October 2015).

If realised, a merger between TIM Brasil and Oi would create the largest wireless operator in Brazil in terms of subscribers. According to TeleGeography’s GlobalComms Database, as at 30 June 2015 the pair claimed 26.2% and 17.7% of the mobile market respectively, and would leapfrog market leader Telefonica Brasil (Vivo, 29.1%) and Claro Brasil (25.0%) if they combined.

Brazil, LetterOne Holding (L1 Technology), Oi, Telecom Italia (TIM), TIM Brasil