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Russian investment group still on lookout for opportunities in Brazil; Oi shares plunge.
Shares in Brazil’s Oi plunged this week after its ambitious plan to merge with TIM Brasil collapsed.
Russian investment group LetterOne (L1) Technology – which had pledged to plough US$4 billion into Oi if it struck a deal with Telecom Italia’s local unit – on Thursday withdrew its offer of funding after it was informed by the Italian incumbent that it did not wish to conduct further negotiations.
"L1 Technology’s approach was to unlock the potential of this envisaged telecoms deal through a structure within which all companies were aligned. However, without TIM’s participation, L1 Technology can’t now proceed with the proposed deal as previously envisaged," said L1, in a statement on Thursday.
TIM is the second largest player in Brazil’s mobile market, but lacks a significant fixed-line business, putting it at risk of being left behind as the market moves towards converged services. Meanwhile, homegrown Oi is the smallest of Brazil’s big four MNOs, but it leads the fixed-line telephony market and is second-placed when it comes to fixed broadband.
The combination of the two would have created a powerful integrated services provider; however, Telecom Italia has maintained throughout the saga that Brazil is a strategically important market for the operator.
News of L1 and TIM’s withdrawal sent Oi’s shares tumbling more than 15%.
"Oi will continue to undertake its efforts towards operational improvements and business transformation focusing on austerity, infrastructure optimisation, revisions of procedures and commercial actions," said Oi, in a separate statement.
Despite the setback, L1 said it has not given up on Brazil.
"Despite a challenging macro environment, LetterOne is interested in investing in Brazil: a country with good long-term growth potential," L1 said.
