Merger of Brazil’s regional incumbents.
Brazil’s regional fixed-line incumbents Oi and Brasil Telecom have merged into one company. This is one of the largest mergers and acquisitions in Latin America, affecting not only the fixed-line sector, but also the mobile and broadband markets.
Trading as Oi, the Telemar group is the largest fixed-line operator in Brazil in terms of turnover and number of lines, and is the incumbent provider of local and intra-regional fixed-line telephony in Region I (northern and eastern Brazil, including Rio de Janeiro and Minas Gerais). Oi also provides mobile telephony, data communication, dial-up Internet access, and broadband services.
In January 2009, Oi completed the acquisition of Brasil Telecom (BrT), the incumbent provider of local and intra-regional fixed-line telephony in Region II (southwestern, central, and southern Brazil, including the Federal District). As a result, BrT was merged with Oi, and the Brasil Telecom brand is being gradually discontinued in the course of 2009.
The Oi/BrT merger had been brewing since 2003, when the two companies and mobile operator TIM Brasil were in talks to merge all three operations. At the time, any such deal was impossible as Brazil’s telecoms law prohibited the merger of incumbents. But in 2007, merger plans gained momentum after the Brazilian government expressed itself favourably disposed to changing telecoms regulations, because it saw a merger of Oi and BrT as a way of creating a strong national player able to compete with foreign-owned giants America Movil and Telefonica. In February 2008, it accepted an official request by Oi and BrT to amend the telecoms law.
In April 2008, Oi agreed to purchase 60.5% of the voting capital and 22.28% of the total capital of BrT Part for R$5.86 billion (US$3.51 billion), and said it would spend as much as R$6.5 billion more on buying additional shares in the group. That same month, Oi began to acquire shares in BrT and BrT Part through its wholly owned subsidiaries Copart 1 Participacoes and Copart 2 Participacoes. Oi continued to increase its stake in BrT and BrT Part gradually throughout the course of the year.
In October 2008, Anatel approved an amendment to Brazil’s telecom law to allow a single fixed-line operator to service more than one concession area, effectively paving the way for Oi to complete its takeover of BrT. This amendment was ratified by the government in the following November.
In December 2008, Cade and Anatel approved Oi’s acquisition of BrT. As conditions for Cade’s approval, Oi pledged to maintain the broadband Internet access providers iG and Oi Internet in independent business units. It also agreed to keep a dial-up Internet access provider at no cost to users, in all cities where Oi Internet, iG, or Ibest already rendered this service free of charge.
In January 2009, Oi acquired 100% of Invitel, the company that used to own indirect control of BrT Part and, consequently, of BrT. Thus, Oi completed the takeover of BrT, and began the process of consolidating the company’s operations with its own.
The Oi/BrT merger creates a company with the following market positions:
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Fixed-line market – Oi was already the market leader, while BrT was the number three operator behind Telesp. The merged company has ended up with 53% of Brazil’s fixed lines in service;
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Mobile market – Oi was the number four and BrT the number five operator. Even adding together Oi’s and BrT’s customers, the combined firm is still in fourth place, with a market share of 21%;
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ADSL broadband market – BrT and Oi occupied the second and third place respectively, but the combined Oi/BrT has overtaken Telesp to become the leader with a market share of 54%.
See also:
Brazil – Telecom Market Trends, Key Statistics & Regulatory Overview
Brazil – Internet and Broadband Market – Overview, Statistics & Forecasts
Tagged in: Brazil, Latin America (Includes the Caribbean)
