Brazilian carriers signal mega merger
28 April 2008
Brazilian carriers signal mega merger
Brazilian carrier Telemar Participacoes, which operates under the Oi brand, will be holding a conference call later on Monday to discuss the proposed acquisition of fixed line operator, Brasil Telecom.
Telemar shareholders agreed to the deal on Friday, which would see the company pay out Reais5.9bn (Eur2.26bn) to acquire the parent of Brasil Telecom, accompanied by an offer to minority shareholders which would increase the total purchase price to about Reais12.4bn.
However the move has stirred some controversy because it would be illegal under current rules. But it is known that the government is in favour of changing the law to allow for some consolidation in the Brazilian telecoms market. In fact, new rules are expected to be introduced within the next couple of months.
If the deal were to go ahead it would create a home grown fixed line carrier with over 60 per cent market share as well as around 16 per cent of the mobile market. This would probably give the regulator, Anatel, food for thought.
In a filing on Friday, Telemar said it, "understands that complementing among switched fixed-line telephone services, mobile telephone services and data communications services network provided by Telemar and by BrT will enable it to achieve economies of scale and of scope that will enable it to better meet the needs of the market and consumers."
Ovum analyst, Fernanda Mello Veiga, said, "This deal can only go ahead if the Brazilian president, Luis Inacio Lula da Silva, approves a decree authorising the merger. We believe that Brazilian president Lula may approve the decree because Oi would argue that a super national telco (majority-owned by Brazilian capital) would be able to compete on equal footing with Spanish conglomerate Telefonica and Mexican group Telmex/America Movil - the other telcos with significant power in Brazil."
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