Oi Said in Talks to Sell Unitel Stake for $2 Billion

Oi SA, Brazil’s fourth-biggest wireless carrier, is in talks to sell its 25 percent stake in Unitel SA, Angola’s largest mobile-phone company, to other shareholders for more than $2 billion, according to people familiar with the matter.

Isabel dos Santos, the daughter of Angolan President Jose Eduardo dos Santos, and other shareholders such as state-owned oil company Sonangol are among the possible buyers, said the people, who asked not to be identified because the discussions are private. Grupo BTG Pactual, one of Oi’s largest shareholders, is advising the Rio de Janeiro-based carrier on the sale process, the people said.

Oi acquired the stake when Portugal Telecom SGPS SA contributed its assets in a May capital increase as part of their planned merger. Isabel dos Santos, Africa’s richest woman, and other Angolan shareholders have a right of first refusal if Portugal Telecom’s stake changes hands, and they sent a letter in March arguing that the transfer to Oi triggered that clause, according to a filing. Portugal Telecom has disputed that assertion, Oi said in the filing.

Oi shares were unchanged at 1.43 reais at the close in Sao Paulo.

The book value of the Unitel stake was 494.3 million euros ($652.1 million) at the end of last year, not including accounts receivable from Unitel of 238.2 million euros, mostly for unpaid dividends, according to Oi’s filing. In its own financial reports, Oi assigns the Unitel stake a fair-market value of about 4 billion reais ($1.8 billion).

Economic Interest

The stake in Unitel is owned by Africatel, a Portugal Telecom subsidiary in which Oi now has 75 percent ownership. That means its economic interest in Unitel is 18.8 percent.

“Unitel isn’t making any pronouncements on the subject,” Alcirene Queta, a spokeswoman for the company based in Luanda, the Angolan capital, said today in an e-mailed reply to questions.

Mateus Cristovao, spokesman for Sonangol, said by telephone he couldn’t immediately reply to questions seeking comment. Unitel also wasn’t able to provide a comment for Isabel dos Santos, who is on the board. BTG and Oi said they had no immediate comment, while a spokeswoman for Portugal Telecom wasn’t immediately available for comment.

Oi Chief Executive Officer Zeinal Bava said earlier this month the company is considering more “asset disposals” after cutting debt by raising almost $3 billion since April 2013 in sales of infrastructure from submarine cables to landline towers.

All Options

Oi was cut to junk status by Fitch Ratings and Standard & Poor’s in July after it was revealed that Portugal Telecom hadn’t disclosed an investment of 897 million euros ($1.22 billion) in commercial paper it bought from Espirito Santo International’s subsidiary Rioforte Investments SA, which then failed to pay the debt.

“We are focusing on ensuring that we can look at all the strategic options available so that we can continue to dispose of assets,” Bava said on an Aug. 6 conference call with analysts.

Oi has other towers to sell in Brazil and Portugal, and a fiber network in Portugal could be an option, Chief Financial Officer Bayard Gontijo said on the call.

While it works to shore up its balance sheet, Oi is also attempting to strengthen its competitive position in Brazil by participating in the frenzy of merger activity sweeping the industry. The company is looking for partners to make a joint bid for wireless carrier Tim Participacoes SA, letting Oi take a portion of its rival’s assets, according to people familiar with the matter.

Teaming Up

BTG is trying to get Telefonica SA and America Movil SAB to team up with Oi on a mostly cash offer to acquire Tim from Telecom Italia SpA and then break up the Brazilian mobile phone company, said two of the people, who asked not to be identified because the discussions are private.

“A possible sale of Unitel would be a possible way to finance an offer for Tim Brasil and it would also clear doubts over the capacity of the company to monetize this asset,” Espirito Santo Investment Bank said today in a research note.

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