Oi closes in on USD1bn credit line ahead of mooted TIM Brasil tie-up

20 Jan 2016

Brazilian telecoms firm Oi is in the midst of negotiations with two banks to provide as much as USD1 billion in credit ahead of its desired merger with TIM Participacoes (TIM Brasil), Bloomberg reports. The funding will be used to refinance Oi’s short-term debt, a person with knowledge of the matter told the news agency, while the banks are also likely to join the company’s M&A advisory team. While the identities of the lenders have not yet been disclosed, sources have suggested that Barclays and Banco Santander are likely to get roles in the transaction, while Grupo BTG Pactual will remain the lead negotiator.

As previously reported by TeleGeography’s CommsUpdate, in October 2015 Luxembourg-based holding company 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 TIM Brasil. Oi and LetterOne subsequently 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 September 2015 the pair claimed 26.1% and 17.8% of the mobile market respectively, and would leapfrog market leader Telefonica Brasil (Vivo, 28.6%) and Claro Brasil (25.3%) if they combined.

Brazil, LetterOne Holding (L1 Technology), Oi, TIM Participacoes (TIM Brasil)