Portugal Telecom approves merger with Oi. América Móvil targets TIM.
Consolidation in the Brazilian telecommunications market had another chapter this Monday (8), with Portugal Telecom approving the merger with Oi and the Mexican América Móvil admitting that it may join Oi in the joint offer for TIM Participações; the move takes place on the eve of the auction of the 700 MHz band, scheduled for the 30th, which will be used for 4G technology in the country, and which will require billions of dollars in investments from the companies.
By Luciana Bruno
(Reuters)- Consolidation in the Brazilian telecommunications market took another turn on Monday, with Portugal Telecom approving its merger with Oi and Mexico's América Móvil admitting it may join Oi in a joint bid for TIM Participações.
The move comes on the eve of the 700 MHz band auction, scheduled for the 30th, which will be used for fourth-generation (4G) technology in the country, and which will require billions of dollars in investments from companies.
Portugal Telecom shareholders approved the merger with Oi at a general meeting, dispelling uncertainties about the operation after the default on a controversial investment by the Portuguese operator in debt held by Rioforte, a holding company of the Espírito Santo Group.
A spokesperson for Portugal Telecom confirmed that the terms of the merger were approved by 98,25 percent of the capital present at the shareholders' meeting, exceeding the required two-thirds majority.
The assembly approved the revised merger agreement, reducing Portugal Telecom's stake in CorpCo, the company to be created after the merger with Oi, from 38 to 25,6 percent.
The process had been threatened after information emerged regarding a 900 million euro investment by Portugal Telecom in debt held by Rioforte, which then defaulted on its payments, forcing a revision of the terms of the agreement with Oi.
Portugal Telecom holds a six-year option to purchase shares in CorpCo, which it may exercise if part of the investment in Rioforte is received. Portugal Telecom SGPS will then hold an option to purchase shares in Oi and the debt of Rioforte.
Also on Monday, the Boards of Directors of Oi and Telemar Participações (Tel Part), one of its controlling shareholders, also approved the revised terms of the merger.
AMÉRICA MÓVIL
On another front, América Móvil, owner of Claro in Brazil, admitted that it plans to talk to Oi about a possible joint offer to buy TIM Participações, the Mexican company's CFO said on Monday.
"We decided to explore that option initially. We're going to talk to them," said CFO Carlos Garcia Moreno.
Earlier, the executive told Bloomberg that financing a potential deal to buy Brazil's second-largest mobile operator would not be a problem, and that the company could take on debt.
In August, Oi revealed plans to buy TIM, controlled by Telecom Italia, stating that it intended to bring América Móvil and the Spanish company Telefónica, owner of Vivo, into a joint bid.
A potential split of TIM would give the companies more space in the mobile phone market, currently contested by four major operators, as they struggle to add customers, invest in high-speed networks, and protect margins in a stagnant economy.
In addition to the upcoming auction for the new 4G spectrum, Monday's announcements coincide with Telefónica's negotiations to purchase GVT, which is owned by the French media group Vivendi.
(With reporting by Daniel Alvarenga, Tomás Sarmiento and Christine Murray)