Telecom Italia (TI) is reportedly favouring an all-stock bid through its Brazilian business to acquire integrated operator Oi — an approach that would enable it to invest in its network in the South American market.
According to Bloomberg sources, TI is waiting for the Brazilian government and telecoms regulator to indicate whether or not it would block a potential merger between the two companies, before making a move.
By avoiding the use of cash, TIM would have more funds to invest in the quality of its networks and increase spectrum coverage, Carlo Alberto Carnevale Maffe, a professor of business strategy, told Bloomberg.
It would also mean TI would avoid increasing its debt. The Italian incumbent’s adjusted net debt stood at €26.6 billion as of 30 September.
TI’s board gave CEO Marco Patuano its backing to explore a merger between TIM and Oi at the end of November but the sources said the company is unlikely to make a decision before February or March.
TI owns 67 per cent of Brazilian mobile business TIM Participacoes, which is the only player in the market without a fixed presence, leaving it vulnerable to rivals Telefonica (Vivo), America Movil (Claro) and Oi.
It failed in its bid to acquire Brazilian fixed player GVT in September, when Telefonica’s bid was preferred by the company’s owner Vivendi.
There have since been persistent reports that the other three telecoms players in Brazil are putting together a bid to acquire TIM and divide the company’s assets amongst themselves. Oi has denied this is the case, however.
If TI and Oi were to join forces the combined entity would be the largest mobile operator in Brazil, surpassing Telefonica’s Vivo. Oi is already the largest fixed player but fourth biggest mobile operator.
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