Published:
28-Apr-08
Telemar Norte Leste, which provides communications services under the Oi brand in northern and eastern regions in Brazil, has outlined to shareholders its plan to acquire rival Brasil Telecom (BrT), provider in the central and southern areas of the country. The cost of acquisition would reportedly be BRL 5.86bn (USD 3.51bn) and would involve the purchase of Invitel – the parent of BrT - followed by a share offer to holders in the provider. The deal needs approval by regulatory authority, Anatel, in addition to changes in the law that denies companies operating in different parts of the country from having the same controlling shareholders. Telemar has agreed to pay a BRL 490m penalty in case the transaction is rejected by Brazil's telecommunications agency, and has offered BrT stockholders BRL 315m if they agree not to file any complaints about the acquisition.
Our take...
The two companies combined currently total around 22.2 fixed line service customers, 20.3m mobile service subscribers, 3.1m DSL network connections and around 60,000 pay-TV customers, as of YE 2007. Telemar expects its broadband base to rise to 12m broadband customers over the next five years should the deal go ahead and current growth continue. If this figure were attained, the merged business would be a dominant force in country, representing some 60-70 per cent of the broadband market, according to Screen Digest forecasts. The merged company also expects to expand to serve 30m international customers with its services over the same forecast period; currently the two companies only have operations within Brazil.
The merged company would be well positioned against the current market leader in broadband provision, Telesp, owned by Spanish incumbent telco Telefonica; Telesp reported over 2m customers at YE 2007.
Any combined company would further benefit from an enlarged backbone network to compete with provider Embratel (owned by Mexican incumbent telco Telmex) whose backend links in Brazil to 23 regional capitals and the 30 most poulated cities. Internationally, Embratel's network also reaches Argentina, Uruguay, French Guiana, USA, Portugal and the African continent, and uses 4 satellites. By comparison, Telemar's backbone covers 18 regional capitals and 26 of the 30 most populated cities domestically; BrT's serves 12 regional capitals and 17 of the 30 most populated cities. Together Telemar and BrT also have links to USA and Venezuela.
Brazil,
Telemar confirms takeover talks with Brasil Telecom
