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The Brazilian telecoms market might see some important changes in 2015. For most of 2014, rumors abounded regarding a move toward consolidation among the top four telecoms groups. The acquisition of GVT by Telefonica validated the feeling that Brazil’s market is about to change, and Oi’s declared determination to participate in M&A activity ensures that in 2015 the rumor mill will be in full motion.
The most vocal proponent of the reduction of players in Brazil’s telecoms market is Oi, the largest national player. The company owes its current scale to the acquisition of Brasil Telecom, which used to operate in the central-western and southern areas of Brazil. Oi has been struggling with huge debt, amounting to BRL47.7bn, giving the company a rather uncomfortable gross-debt/EBITDA ratio of 3.76 as of 3Q14. Most of its actions in the past few years have been driven by the need to reduce its debt, such as its merger with Portugal Telecom to create CorpCo, a holding company that groups Brazilian, Portuguese, and African operations.
The company has agreed to sell its Portuguese assets to European company Altice for €7.4bn. If Portugal Telecom shareholders approve the transaction, Oi will have the resources to either reduce its debt or embark on another acquisition. This transaction is crucial for Oi, which has been struggling for years with its difficult situation. In the past four years, it has changed CEO four times and has had to deal with a reduction in capex.
The most likely target for Oi seems to be the second-largest mobile operator in the country, TIM Brasil, owned by Telecom Italia. The press has been reporting that Oi aims to form a consortium with Telefonica and America Movil to buy TIM Brasil and split the company in three parts among the members of the consortium. However, Telecom Italia might be preparing an offer for Oi. In any case, there are significant regulatory hurdles to overcome, and negotiations will certainly take a considerable amount of time.
All in all, the Brazilian telecoms landscape is likely to change significantly in 2015, though who will have the upper hand in the game has yet to be decided.
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Verizon 5G Home is a milestone in the telecoms market because it is the first large-scale commercial launch of broadband services based on 5G technologies, albeit not on a fully standardized version of those technologies.
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