Joint Venture: Oi (Telemar) and BrT
The entrance of Telefonica in Telecom Italia intensified the discussion about a possible joint venture between Oi(Telemar) and Brasil Telecom (BrT). This joint venture would depend on:
The following figure presents a hypothetical situation in which Tim is included in the group of Telefonica and there's the joint venture of Oi with Brasil Telecom.
In this situation the Group of Telefonica (Telefonica/Vivo/TVA) would keep leadership in Gross Revenue and Cellulars quantity, Oi/BrT would lead in Fixed Accesses and Broad Band and the group América Móvil/Telmex (Embratel/Claro/Net/Vivax) in Pay TV.
Although being strong in the brazilian market, the group composed by Oi/BrT would be minor than the others. Oi/BrT's Net Revenue in 2006 was R$ 27.2 billion (US$ 12.7 billions), around 1/3 of the net revenue of América Móvil/Telmex (US$ 37.4 billions) in the world. The revenue of Telefonica was 52.9 billion euros in 2006.
Oi/BrT Strategy
A new company composed by Oi/BrT would face big challenges. It would have to extend its strategy to become a company with national coverage and increase the participation of cellular revenues and data communication in its total revenue. In 1Q07 these itens represented 14% and 13% respectively.
The revenue of fixed telephony, 73% gross revenue of Oi/BrT in 1Q07, it's in decrease, as much in local telephony as in long distance. Both operators had together in 2006 decrease of 1.6 millions in the quantity of fixed accesses in service. In the 1Q07 decrease was 184 thousand.
In the opposing direction of local telephony concessionaires Embratel (Livre and Net Fone) and GVT are growing in the local fixed telephony.
Cellular - Oi and BrT presented different situations:
| 1Q07 | Oi | BrT | Oi/BrT |
| Cellulars | 13,358 | 3,638 | 16,996 |
| Pre-pay | 83.0% | 73.4% | 80.9% |
| Net Adds | 280 | 261 | 541 |
| ARPU | 22.1 | 33 | 24 |
Oi, although leading market share in the Region I, keep having low growth and could be surpassed by Tim in the following months. Although having 4 times more cellulars than BrT, Oi net adds in 1Q07 were similars to BrT. In the 1Q07 Region I had net adds of 1,369 thousand cellulars and Region II 351 thousand cellulars.
BrT, different than Oi, is obtaining costumers that spend more and it's presenting ARPU of R$ 33, much more than Oi (R$ 22).
Oi/BrT would need to expand its area to São Paulo and improve its data offer in Oi's area, conquering place in the corporative segment. The implantation of 3G network in national level would put Oi/BrT in conditions to compete with other cellular groups in the country.
A expansion strategy would demand some shareholders' investiment of this new company.
In the Broad band also would be necessary to increase investments. Oi/BrT had in 1Q07 net adds of 120 thousand Broad Band accesses, lesser than Net/Vivax with 122 thousand.
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