Private equity firm LetterOne has confirmed a deal with Brazilian mobile operator Oi in an alliance that the partners claim “enables the consolidation of the sector”.
The announcement follows recent claims from LetterOne that it would invest as much as $4 billion into Oi if the fixed and mobile provider secured a successful merger with Telecom Italia’s Brazilian unit, TIM Participacoes. A merger between these units has long been the subject of speculation, but has not yet transpired.
Oi stated that the deal would allow it to become “a more robust player” in the Brazilian market, adding that it would reduce the operator’s leverage while delivering benefits that would generate value for shareholders.
“A potential business combination of Oi and TIM Participacoes should result in the creation of a more complete and well-positioned telecommunications operator that would be able to compete against global players already operating in Brazil. Customers should benefit from the resulting strengthening of the Company,” stated the firm.
Oi and LetterOne are now entering into a seven month period of exclusive cooperation, beginning from the date of the first proposal, October 23rd. While TIM’s parent company Telecom Italia has not commented on a future merger, CEO Marco Patuano has indicated that fixed-line regulations should be cleared up to facilitate a potential merger.