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Russia’s LetterOne can invest $4 bln in Brazil’s operator Oi

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MOSCOW, Oct 27 (PRIME) -- LetterOne, an investment firm of Russian billionaire Mikhail Fridman, has proposed to invest U.S. $4 billion in Brazilian phone company Oi, though the offer is conditioned on the success of a potential merger with TIM Participacoes, the Brazilian unit of Telecom Italia, the Wall Street Journal said in a report, seen by PRIME late Monday.

If the merger goes ahead, LetterOne will be an important shareholder in the new company, though the exact size of the stake has yet to be defined, according to a person involved in the talks who declined to be identified.

The LetterOne investment will be presented to Oi’s board later this week and if it is approved, “a formal proposal to Telecom Italia will be made by the end of November,” said the person, without providing any more details.

TIM Participacoes said Monday in a statement that there are currently no talks with LetterOne or Oi about a possible merger or acquisition. A LetterOne spokesman declined to comment.

It is not the first time Oi has tried to spark a consolidation in Brazil’s telecom industry as the company struggles to reduce its huge debt.

In August of 2014, Oi said it had hired Brazilian investment bank BTG Pactual to look into acquisition and merger possibilities in Brazil, including a potential deal with TIM Participacoes.

BTG – which still has a mandate from the company to work on a potential deal – received a proposal from LetterOne that could include a capital contribution of as much as $4 billion in Oi, the phone company said Monday.

“Oi can’t stay paralyzed, the company needs to do something to reduce its debt because its main competitors continue to invest and gain even more of a competitive advantage,” Alexandre Montes, a telecom industry analyst at consultant firm Lopes Filho Consultores, in Rio de Janeiro, told the daily.

Oi could use LetterOne’s $4 billion to cut debt, paving the way for a merger with TIM Participacoes. “From TIM’s side, a merger with Oi could be positive, because TIM doesn’t have a relevant position in the fixed-phone and broad-brand markets,” Montes added.

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