(Adds comments, share performance in paragraphs 2-7)
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 Brazilian telecommunications company Oi SA if it merges with rival TIM Participações SA.
Rio de Janeiro-based Oi said in a securities filing on Monday that financial advisor Grupo BTG Pactual SA had received the proposal from LetterOne and passed it along for Oi’s consideration. Under the plan, LetterOne requested exclusive terms to help negotiate a tie-up between Oi and TIM.
Oi’s preferred shares jumped 12 percent on the prospects for a deal that would create Brazil’s biggest wireless carrier and relieve pressure in a crowded market suffering from the country’s worst recession in a quarter century.
TIM gained 4 percent and shares of Telecom Italia Spa , which owns two-thirds of TIM, rose as much as 2 percent on news of the LetterOne proposal. TIM said in a written statement that it was not in negotiations with Oi or LetterOne.
It remains to be seen whether Telecom Italia is open to dealmaking. The Italian company has called TIM a strategic asset, accounting for a third of its revenue, but it weighed options for a deal in Brazil last year before tabling talks in February as Oi struggled through a tough turnaround.
Oi CEO Bayard Gontijo has streamlined operations, cutting everything from payroll to air conditioning and selling a Portuguese unit to pay down a staggering net debt of 34.6 billion reais ($9 billion) in June.
Oi still lags its three major rivals in Brazil’s fiercely competitive wireless market, with 18 percent of subscribers, but it has a nationwide fixed-line network that would complement that of No.2 wireless carrier TIM.
Together they operate 44 percent of mobile lines in the country, well ahead of current market leader Telefonica Brasil SA and the local Claro unit of America Movil SAB , which have 29 percent and 25 percent of the market.
Oi declined to give details of negotiations beyond the disclosure in Monday’s securities filing. LetterOne, which declined to elaborate on the proposal, did not say when the offer expires.
LetterOne invests in energy, technology and communications, including nearly half of the voting shares in Vimplecom, which agreed to combine its Italian mobile operations with Hong Kong-based Hutchison in August.
LetterOne oversaw about $25 billion at the end of last year.
$1 = 3.86 Brazilian reais Reporting by Guillermo Parra-Bernal and Alberto Alerigi Jr in Sao Paulo; Additional reporting by Agnieszka Flak and Stefano Rebaudo in Milan and Maria Kiselyova in Moscow; Writing and additional reporting by Brad Haynes; Editing by William Hardy and W Simon