Oi to sell assets to fund ‘fibre wholesale opportunity’ in Brazil

17 July 2019 | Alan Burkitt-Gray

Cover

Brazilian operator Oi is hoping to raise between 6.5 and 7.5 billion reais ($1.7-$2 billion) for new fibre-based operations by selling some of its non-core assets.

Oi will use the money saved to invest in fibre infrastructure, “to unlock and capture significant value from strategic options”. It believes it has a “unique and non-replicable infrastructure”, that gives it a “large unregulated fibre wholesale opportunity”.

The company, which two months ago announced a quarterly profit of $170 million after its bankruptcy reorganisation, said yesterday that it wants to sell towers by the end of this year and a data centre in the first half of 2020. Oi is understood to have a data centre in Brasilia, the capital city. 

Other funds should come from the result of the arbitration of Oi’s dispute with Angolan mobile operator Unitel, which should bring in $650 million by the end of 2019, and unspecified “other non-strategic” disposals by the end of 2020.

The total should bring in 70-80% of Oi’s market capitalisation, the company said in a presentation to investors and analysts.

Oi wants also to reduce its recurring cost base by one billion reais ($265 million) a year – through such measures as portfolio simplification, IT simplification and reorganisation.

The company has already raised four billion reais ($1.1 billion) in a capital increase, and aims to raise 2.1-3.1 billion reais ($560-$820 million) through social security credits. Oi said yesterday that it has already received a favourable decision on the first $560 million of that.

Oi said it “plans to become the leader in fibre and infrastructure” in Brazil, with “potential to increase [its] multiple through [its] fibre-centric model and value from strategic options”.

But it has an uphill battle. Yesterday’s presentation compared Oi’s multiple of 3.4 with a figure for “traditional telcos” such as Vivo, TIM Brasil, America Móvil, Verizon, Deutsche Telekom, AT&T, T Mobile, Telstra and Vodafone of 6.7, and the 11.7 which it calculates from fixed infrastructure telcos such as Uniti, Zayo, Chorus, GTT and Cogent.