Oi assets may provide opportunities for infra groups

With its newly approved judicial recovery plan, Brazil's Oi is considering selling practically all its remaining assets and retaining only part of the end-user fiber broadband operation (FTTH).

The bad news for the traditionally troubled telco could be good news for players in the telecom infrastructure market looking to add towers, a B2B unit, and a 34% stake in the neutral fiber network V.tal, a JV with funds linked to BTG Pactual.

The potential disinvestment process – fresh off a previous, six-year restructuring process – looks to reduce a debt load of over 44bn reais (US$8.8bn).

The V.tal stake could interest BTG and other investors in Brazil's neutral networks, such as CDPQ (FiBrasil), IHS Towers (I-Systems) and American Tower. In the case of FiBrasil and I-Systems, an acquisition could face competition hurdles given the size of these networks, a market source told BNamericas.

For American Tower, which in Brazil operates wholesale fiber networks mainly in Minas Gerais state, acquiring a stake in V.tal may not be in line with its limited scale-up strategy.

In Mexico, its parent company just sold the local fiber operation to Flõ Networks, exiting that fiber market, and it's mulling similar moves in other geographies, such as India.

Oi is also considering selling part of its fiber broadband retail operation, ClientCo, and keeping only a stake in the operation. This asset could be of interest to some established ISPs. Despite potential competition roadblocks, it could also be appealing to fellow telcos Telefônica Brasil, TIM and Claro.

TOWERS

Oi's plan includes the possibility of selling towers used in its fixed operation, a divestment it has already undertaken in the 2020-22 period when it sold fixed and mobile operation towers to DigitalBridge’s Highline. 

DigitalBridge-Highline does not comment on specific cases, but the group has said it intends to continue to grow in Brazil organically and through acquisitions.

A source from a company in the tower segment told BNamericas that the firm may bid for Oi's tower assets in the future.

Other assets listed by Oi include its satellite-TV subscriber base and related equipment, a 50% stake in the Paggo mobile payment business, and its B2B business and IT unit Oi Soluções. 

Just last week Oi announced a new contract for Oi Soluções. The unit was hired to monitor and block virtual threats at communication platform provider Zenvia by integrating security events in different applications (such as firewalls and antivirus) through its SIEM (Security Information and Event Management) product. Zenvia will also be able to rely on support from Oi Solutions' Security Operations Center (SOC), according to the announced partnership.

Also listed for potential sale are Oi's call center unit, Thato, and network maintenance operations subsidiary, Serede, as well as remaining stakes in international operators and dozens of real estate assets in Brazil.

Oi has already sold its pay-TV operation to Sky, though the transaction is still pending final approval.

Oi cites as general causes for its new request for judicial recovery a two-year delay in the approval of the sales of its mobile operation and fiber infrastructure network.

The company also cites problems with logistics, foreign exchange, inflation, lack of financing and increased expenses related to the Covid pandemic.

The company claims to remain committed to the continuity of its operations and to its customers. It is the only telecom service provider in over 3,000 of Brazil's 5,568 Brazilian municipalities.

GOALS

The plan approved by Oi's board still needs to be ratified by shareholders and the judge in charge of its latest judicial reorganization. The company said it expects to raise at least 4bn reais through secured financing and doesn't rule out capital increase and new lines of credit.

More details on Oi's plan can be found here.

In February, before the approval of the new judicial reorganization and the release of the plan, Fitch Ratings had downgraded Oi's credit ratings from “CC” to “C.”