Oi Would Use Portugal Proceeds to Pay for Tim Bid, CEO Says

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Oi SA Chief Executive Officer Bayard Gontijo said Brazil’s biggest landline phone company would use proceeds from the sale of its Portuguese assets to finance any bid for wireless carrier Tim Participacoes SA at home.

“Should I make an offer for Tim, I will use part of the cash I will receive from the sale of Portugal Telecom,” Gontijo said today in a phone interview. The company is analyzing all possible merger and acquisition options, and there will be no consolidation in Brazil without Oi, he said.

Oi, which agreed to sell its Portuguese assets to Altice SA last week, wants to buy Tim through a financial vehicle and keep 25 percent of the company, with the rest being split between Telefonica SA and America Movil SAB, people familiar with the matter said last week. Carriers are trying to consolidate a Brazilian market where there are fewer new users and billion-dollar infrastructure investments are weighing on profit.

Tim rose as much as 3.9 percent in Sao Paulo, as Oi jumped 5.4 percent. Telecom Italia SpA, which controls Tim, rose as much as 2 percent in Milan. Portugal Telecom SGPS SA, which owns a stake in Oi, fell as much as 4.5 percent in Lisbon.

Oi, based in Rio de Janeiro, is the smallest of the four major mobile carriers in Brazil and has invested less than rivals in infrastructure. The company has more than $18 billion in debt, and a combination with another operator would help Oi add customers and invest in network capacity as demand for mobile data increases.

‘All Scenarios’

Oi, Telefonica and America Movil are said to be planning a $15 billion offer for Tim, people familiar with the matter have said. The bid for Tim, which is 67 percent owned by Telecom Italia, would be made by Grupo BTG Pactual acting as a financial vehicle, the people said.

Telecom Italia believes Tim should be valued at about 20 billion euros ($25 billion) or more, including debt, according to a person familiar with the matter. The Italian carrier last month received authorization from its board to explore a combination between Tim and Oi.

“We are working with BTG on all possible consolidation scenarios,” Gontijo said. “My job as executive is to generate value for shareholders, and that will be taken into consideration when I evaluate all of the options we have for consolidation in Brazil.”

Oi isn’t in a rush to push for consolidation, said Gontijo, who started in the CEO role in October and is also chief financial officer and director of investor relations.

Oi’s average monthly sales in Brazil rose 3.7 percent in October and November compared with the average monthly sales in the third quarter of 2014, according to a regulatory filing today. Oi published the numbers to “give transparency to the market” and show it is making progress with a plan to turn around operations, strengthen its balance sheet, pursue consolidation and improve corporate governance, Gontijo said.

Gontijo reiterated that Oi expects 2015 sales minus capital expenditures to rise by between 1.2 billion reais ($450 million) and 1.8 billion reais.