Oi in talks with Telefonica, TIM, AT&T, China Mobile to sell business

Oi, a telecom operator in Brazil, is in discussions with Spain’s Telefonica and Italy’s Telecom Italia to sell its mobile network to avoid insolvency, Reuters reported.
Oi Brazil network
Oi filed for bankruptcy protection in June 2016 in order to restructure approximately 65 billion reais of debt.

Brazil’s largest fixed-line carrier expects to raise more than 10 billion reais ($2.4 billion) by selling its mobile operations. Oi reported some 35 million mobile clients in its most recent earnings.

Proceeds from the sale would be used to boost fiber-to-home (FTTH) broadband service, considered key to the company’s growth, according to its strategic plan in July. Oi currently has 223,700 miles (360,000 kilometers) of fiber in Brazil and its infrastructure is also used by other carriers.

The company is also in talks with AT&T and China Mobile. Huawei may tie up with China Mobile to bid for Oi, according to other reports.

“TIM denies that any negotiations are underway with Brazilian OI,” said TIM spokesperson in a statement issued to TelecomLead.com.

Brazilian antitrust watchdog Cade and telecom regulator Anatel may resist the sale of Oi’s mobile network to one or two carriers with operations in the country.

Oi’s mobile customer base has dropped over 20 percent since it filed for bankruptcy. The company is spending heavily to expand its fiber network. Its cash position fell to 4.3 billion reais ($1.1 billion) at the end of June.

If Oi runs out of cash, it could leave millions of Brazilians without service or force regulator Anatel to intervene, creating a potential burden on a tight federal budget.

Credit rating agency Fitch calculated that Oi is likely to face a shortage of 7 billion reais through 2021 due to intensive capital spending.

“Oi depends on assets sales and short-term regulatory changes to finance its transition to a sustainable business model,” the rating agency noted.

Oi hired Bank of America to advise on the sale of non-core assets in January.

The telecom carrier is also trying to speed up the sale of its stake in Angolan carrier Unitel to some of its current shareholders, which could raise around $1 billion and unlock unpaid dividends.

The company is also exploring a capital increase or financing round by existing shareholders, which would give Oi more room to manage its short-term liabilities.

GoldenTree Asset Management, the largest shareholder in Oi, has requested the company to replace its chief executive officer Eurico Teles, Brazilian newspaper O Estado de S. Paulo reported on Tuesday.

Oi chief executive officer Eurico Teles and some shareholders oppose the sale of its mobile network.

Oi, currently under bankruptcy protection, has named Rodrigo Abreu as its chief operating officer. Abreu was previously a member of Oi’s board, where he headed a committee that was advising the company’s senior management on the recovery plan. Abreu, as COO, will oversee key areas for the company such as engineering, systems and operational performance.

Oi posted quarterly loss of 1.559 billion reais ($384.81 million), compared to a loss of 1.258 billion reais in the same period of the previous year. Oi reported net revenue of 5.091 billion reais, down 8.2 percent from a year before. Oi said its capital expenditure rose 50.7 percent in the second quarter to 2.06 billion reais.