Will Oi’s Brazilian competitors buy its mobile division?

Will Oi’s Brazilian competitors buy its mobile division?

TIM Brasil, Telefonica Brasil and Claro, the three leading mobile players in the Brazilian market, have, according to Reuters, confirmed that they are bidding for the mobile unit of cash-strapped rival Oi Group.

This holds out the possibility that the fourth operator may be absorbed by the other three, which is something of a surprise development after last week’s report that Telecom Italia Group had authorised its subsidiary TIM Brasil to bid for the Oi mobile division.

So far the three MNOs have not disclosed the details of the offer. They have said, however, that they did ask Oi for the right to match potential offers it may have received in the competitive process for its assets.

It’s worth pointing out that this is by no means a done deal. The bidding process involves the submission of sealed bids for 100 per cent of Oi’s mobile unit. The minimum acceptable bid is about $2.9 billion (depending on the exchange rate). The winner may not be the highest bidder, however, if the second highest bid over the minimum provides greater legal assurances and certainty for the closing of the sale.

In fact it seems Oi does have a second offer, though no further information is available. The value of neither offer has been made public.

One offer that has been made public is for the company’s tower unit. Oi has apparently had a binding offer, worth about $201 million, for its tower unit from Highline do Brasil II Infraestrutura de Telecomunicações S.A.

Oi intends to use the proceeds of these various asset sales to fund its growing broadband fibre unit and pay off debt, aiming to exit bankruptcy protection.

This might be an ideal solution for Oi: finding bidders that are a known quantity in the market and that have the funds to complete the sale. It would of course also reduce competition in the market.

However, could a fourth operator really survive? Oi’s subscriber numbers are well behind those of its competitors. Its relatively healthy broadband business could no doubt perform better without the effect of an unsuccessful mobile division on its balance sheet.

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