Wireless auction gives glimpse of shrinking Brazil market

miércoles 1 de octubre de 2014 11:52 GYT

By Brad Haynes

SAO PAULO Oct 1 (Reuters) - Brazil's auction of next-generation wireless spectrum was most notable for what was missing: one of the country's four big carriers and, with it, the heated competition that officials hoped for.

The auction on Tuesday was a glimpse into the future of one of the world's most hotly contested communications markets as a sharp slowdown in growth and the rising cost of new technology has spurred a wave of takeover talk.

At the crest is Grupo Oi SA, the carrier absent from the auction. With its soaring debt load and fading fourth-place market share, Oi was already front-and-center in merger speculation.

And by passing up a chance at the latest fourth-generation (4G) cell spectrum, Oi gave tacit confirmation its future hinges on a big takeover, either as hunter or hunted.

In the auction, rivals Telefonica Brasil SA, TIM Participações SA and America Movil SAB de CV bid a total of 5.8 billion reais ($2.4 billion), well below the more than 8 billion reais that officials hoped to raise.

"Missing out on (the) spectrum further increases the likelihood of Oi playing an active role in market consolidation, albeit with its equity holders in a somewhat weaker bargaining position," telecom analysts led by Mark Chapman at CreditSights wrote in a note to clients.

Oi, the only majority-Brazilian player in a market dominated by some of the world's biggest telecom operators, hired local investment bank BTG Pactual in August to study an acquisition of No. 2 wireless carrier TIM. Mexico's America Movil has said it would be interested in partnering with Oi to bid for TIM.

But Oi's whopping net debt of 46 billion reais ($19 billion), three times its current market value, has raised questions about whether it has the firepower for such a move.   Continuación...