08/30/2010


What changes at Oi by the entrance of Portugal Telecom?

 

In July 2010, Portugal Telecom (PT) announced an agreement to acquire 22.38% stake at Oi's Group for R$ 8.4 billion, having the right to name:

  • one member for Telemar Participações' Administration Council and two members for TNL;
  • one executive director for Telemar Participações;
  • the president for the committee of engineering and network, technology and innovation and services offer.

 

Oi Group

 

 

 

 

Portugal Telecom will have, however, relevant participation in Oi's management and will affect its operation strategy.

 

Portugal Telecom operates in a mature market where cellular density overtook the mark of 100 cell./100 inhab. and the networks for broadband accesses (3G and FTTH) are very much more developed than the ones in Brazil.

 

Oi focused profitability over the last 12 months, reducing investments and expenditures for client acquisition. Company's mobile market share dropped for less than 20% in Jul/10, losing the leadership in region I. Oi is getting lower growth if compared with the competitors in broadband and faces GVT's competition inside most profitable markets in the Northeast of Brazil.

 

Despite the differences between the sizes of the markets where these companies operate, Portugal has 1.1% of the Brazilian area and 5.6% of its population, there's no doubt that PT's experience will bring benefits to Oi.

 

 

 

 

 

 

Note that, in matter of size, Portuguese market seems like the state of Rio de Janeiro: despite having an area two times bigger than the state of Rio de Janeiro, its population is 32% smaller.

 

As Oi operates in much bigger market, the operator has 5 times more accesses than Portugal Telecom.

 

 

 

 

 

However, Portugal Telecom's market share in Portugal is bigger than Oi's in Brazil, in all the offered services.

 

 

Market Share
Oi
PT (Portugal)
Cellular
20.1%
45.8%
Fixed
49.9%
62.6%
Broadband
35.3%
45.8%
TV
3.1%
26.5%

 

 

Despite Portugal Telecom's revenue (over the last 12 months) corresponded to 26.6% of Oi's in the same period, the company's investments in Portugal (€ 724 billion) were close to Oi's in the same period (€ 887 billion).

 

 

Million Euros
(las 4 quartes up to 2Q10)
Oi
PT (Portugal)
Net Revenue
12,366
3,283
Ebitda
4,004
1,429
Ebitda Margin
32.4%
43.5%
Investment (Capex)
887
724

 

 

PT is investing continually in:

  • Future technologies, such as FTTH, 3G and 3.5G;
  • New services, like IPTV;
  • Growth of Pay TV clients base

In its annual report (2009), PT presented the following strategy for the Portuguese market:

  • Consolidate the inversion of the historical trend in fixed segment, promoting the success of its Pay TV strategy.
  • Develop products for internet access and data for mobile business, and
  • Launch new solutions on convergent products and services for companies segments.

In other words, PT is investing in Portugal in FTTH, 3G and new services to become an integrated operator. Will Oi follow the same path in Brazil?

 

You could ask:

  • Will the entrance of Portugal Telecom be good for Oi?
  • Will Oi change its strategy and increase its investments in order to resume growth, growing as much as the other operators?
  • Will Oi invest in networks for high speed broadband (FTTH)?
  • Can we expect big expansion of 3G inside Oi's network?

 

 

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Note: The opinions expressed in the published articles in this section are their authors' responsibility.

 

 

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