06/03/2007


Will Orascom buy BrT?

 

The interest of Orascom Telecom, of the egypt family Sawiris, in the acquisition of Brasil Telecom (BrT) is moving on the negotiations of sale, joint venture and consolidation of telecommunication groups in Brazil.

 

Note: Gross Revenue calculated as the the adding of the companies listed in the charge. Gross Revenue of Claro, Telemar and Tim were esteem by Teleco.

 

In 2006, the three groups of Telecom in Brazil were Telefonica (Telefonica/Vivo), Telemar (Telemar/OI) and América Móvil (Embratel/Claro/Net/Vivax). These groups are buyers, while Brasil Telecom and Tim have been recieving acquisition proposals.

 

If wasn't the shareholding conflicts in Brasil Telecom, that put back Telecom Itália of the controll group and the sales of its participation in this operator, the group composed by Tim and Brasil Telecom would be the second telecommunication group in Net Income in Brazil. This situation is even more clear when it's considered the quantity of accesses in each one of the services.

 

Million accesses
Cellulars
Fixed
Broad Band
Telefonica/Vivo
29
12
2
Telemar (Oi)
13
14
1
Embratel/Claro/Net/ Vivax
24
1
1
Brasil Telecom
3
8
1
Tim
25
-
-

 

Brasil Telecom and Orascom Telecom

 

The acquisition of BrT by Orascom Telecom would finish the shareholding conflict in the operator and would consolidate BrT as a 4th independent player in brazilian market.

 

Orascom Telecom is controlled by Sawiris family that also maintain Wind operator of Fixed and Cellular Telephony in Italy. It has cellular operations (GSM) in Algeria, Pakistan, Tunisia, Iraq and Bangaladesh.

 

The emergent markets are the focous of Orascom Telecom, that also has a participation of 19.3% in Hutchinson Telecommunications International (HTIL). HTIL has cellular operations in countries of Southeast Asia as Indonesia and Vietnam. In sold in Feb/07 its participation in Hutch Essar (India) to Vodafone per US$11.1 billion.

 

Brazil fits very well in the profile of Orascom Telecom's investments in the last years. It sold the operations in small markets to concentrathe its future effort in big markets. Used to work in markets with low ARPUs, Orascom Telecom has been getting EBITDA margin superior to 40% in its operations.

 

Orascom seems to be able to acquire not only Telecom Italia in BrT, but also the rest of controllers. The operator has as strategy to put strong controll of its sibsidiaries with procurement and in one Ring responsible to the distribution of Cell Phones and SIM cards.

 

The entrance of this new international group in the barzilian market would be able to expand BrT work conditions beyond its region and representing the buyer with other groups.

 

The proposal of Orascom Telecom by BrT happens in the moment that Telemar (Oi) is playing hard to get a joint venture with Brazil Telecom to create a big group of Telecommunications controlled by brazilian companies. For this joint venture would be necessary a change in the regulation that forbids this kind of operatio between fixed telephony concessionaire. Net sales of BrT to Orascom would be one more situation to Telemar, that had its restructure proposal refused by the sharholders in 2006.

 

Telefonica and América Móvil are also having difficulties with the acquisitions planned. Telecom Italia refused Claro's proposal to acquire Tim in Brazil and with the failure of Sonaecom public offer by Portugal Telecom (PT) (more details), Telefonica must have more difficulties to buy the participation of PT in Vivo.

 

Having or not success, the interest of Orascom by the brazilian market must help the value of actives put on sale. Between them, beyond the participation of Telecom Italia in BrT, are Telemig and Amazônia Celular.

 

You could ask :

  • Who is gonna buy the participation of Telecom Italia in BrT?
  • The regulation that forbids the joint venture of fixed telephony concessionaires as Telemar and BrT should be changed?
  • The entrance of a new international player as Orascom to the brazilian market is good to the final consumer?

 

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