(Adds information on proposal)
By Guillermo Parra-Bernal and Alberto Alerigi Jr
SAO PAULO, Oct 26 (Reuters) - LetterOne Group, the investment firm controlled by Russian billionaire Mikhail Fridman, could pour up to $4 billion into Oi SA, should Brazil’s No. 4 wireless carrier combines with rival TIM Participações SA .
Rio de Janeiro-based Oi said in a securities filing on Monday that financial advisor Grupo BTG Pactual SA handed over the LetterOne proposal to the company’s management and board. Under terms of the plan, LetterOne wants exclusivity terms to help negotiate a tie-up between Oi and TIM.
Shares of Telecom Italia Spa, which controls 67 percent of TIM, jumped as much as 2 percent on news of the LetterOne proposal.
Oi’s security filing comes weeks after TIM, which is Brazil’s No. 2 wireless carrier, denied being in talks over a potential combination with debt-laden Oi.
Earlier this month, Brazilian newspaper Valor Econômico reported that BTG Pactual was engaged in talks with Fridman’s LetterOne, which mainly invests in energy and technology, over how to facilitate a Oi-TIM merger. LetterOne oversaw about $25 billion as of the end of last year.
“The proposal is being properly analyzed by the company jointly with its legal and financial advisors,” Oi Chief Financial Officer Flavio Guimarães was quoted as saying in the filing.
Efforts to contact TIM and Oi for comment on the LetterOne proposal were unsuccessful.
Fridman could be seeking to benefit from the cost savings that often stem from consolidation in a capital-intensive industry like telecomunications, analysts said. Yet, Brazil’s steepest recession in a quarter century will further weigh down revenues, and the fastest inflation in over a decade and expectations of massive tax hikes are likely to erode industry efficiency.
A LetterOne investment in Oi could alleviate Oi’s debt burden - which surpasses 38 billion reais - and improve its financial position before merging TIM, which has little debt and greater ability to expand. Sources have told Reuters that a tie-up between both companies could generate more than 20 billion reais in cost savings and so-called synergies.
$1 = 3.8764 Brazilian reais Reporting by Guillermo Parra-Bernal and Alberto Alerigi Jr,; Additional reporting by Agnieszka Flak in Milan; Editing by William Hardy and W Simon