TIM mentioned in document recommending PT Portugal sale
The boards of Brazilian telco Oi and Portugal Telecom SGPS recommended the shareholders of the latter approve the sale of operations in Portugal (PT Portugal) to France's Altice.
Portugal Telecom SGPS is the holding company that controls Portugal Telecom, whose shareholders are due to vote on the deal in a meeting called for January 12. Oi agreed to sell PT Portugal to Altice for 7.4bn euros (US$9bn).
The recommendation is contained in a report to inform Portugal Telecom's shareholders regarding the terms of the transaction and why the deal would be significant for the company's operations.
The document provides a timeline of the steps undertaken by Oi and Portugal Telecom since they decided to merge operations in August 2013 and outlines Brazil's telecoms market.
According to the document, the sale to Altice will strengthen the company's financial capacity and enable it to engage in the acquisition of or merge with Brazilian carrier TIM.
In a notice to the market, Oi had already said the transaction "will allow it to participate in the industry consolidation process in Brazil."
This is the first time, however, that a combination with TIM is openly mentioned by the companies. Also, Oi admits having sought América Móvil's Claroto jointly bid for TIM. As previously reported, Oi hired BTG Pactual bank to assess opportunities in the Brazilian market.
"BTG Pactual has been engaged in negotiating with third parties with respect to a possible transaction, including with América Móvil, the controlling shareholder of Claro," says the document in reference to TIM.
The document underlines PT Portugal's sale to Altice will reinforce the company's goal of leading consolidation in Brazil, although the companies admit they "cannot predict whether any acquisition, investment or other transaction that Oi makes in the future will succeed or improve its profitability" or that "the consolidation in the telecommunications sector in Brazil will bring synergies and other benefits expected."
The document says the telecoms market in Brazil has changed since Oi and Portugal Telecom decided to merge, citing the acquisition of GVTby Spain's Telefónica.
The move, according to Oi and Portugal Telecom, left TIM "as the only non-integrated operator in the Brazilian market, without a future possibility of having a complete and convergent portfolio." With the exception of the offering of fiber-broadband to specific regions, TIM is essentially a pure provider of mobile services.
In reference to the Portuguese market, the companies say "the offer of integrated services, with the central element of pay TV services and high-speed broadband, has become an essential element for the competitiveness of telecommunications operators."
Furthermore, the document says TIM's controller Telecom Italia has been selling assets to reduce debt levels and that, from the point of view of market analysts, Telecom Italia shareholders defend either a sale or a merger of TIM as a way to improve the company's financial outlook.
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