4 de febrero de 2015 / 13:43 / en 3 años

Telecom Italia awaits Brazil's green light to start M&A talks - sources

* Telecom Italia has not set aside Oi takeover ambition

* Key hurdle of licence expiry could be resolved by summer

* CEO to update board about Brazil scenario on Thursday

By Danilo Masoni

MILAN, Feb 4 (Reuters) - Italian phone group Telecom Italia will wait for a green light from the Brazilian government before starting talks to acquire local rival Oi , two people with knowledge of the matter told Reuters.

After meetings in Brasilia with the communication and the industry ministers last week, CEO Marco Patuano will update the Italian group’s board about the Brazilian situation on Thursday at a meeting called to review the group’s new strategy plan.

In November, Telecom Italia asked Patuano to examine the feasibility of merging its unit TIM Participacoes with Oi to create Brazil’s No. 1 phone operator.

Investors are keen to know the result of the review.

“A signal from the government is needed to start any direct talks with Oi,” one of the sources said on Wednesday.

“A strengthening of TIM is seen with favour by officials but there are key issues that still have to be resolved,” the other source added.

Telecom Italia declined to comment.

The Brazilian government is currently weighing regulatory and debt issues and is also in talks about licences which could last until the summer.

After losing out to Spain’s Telefonica in a bidding war to buy Brazilian broadband operator GVT last year, Telecom Italia remains the only operator in Brazil without a fixed line network.

A deal with Oi would solve that problem since the Brazilian national champion is the leader in fixed phone service and number two in broadband behind Mexico’s America Movil.

But given the sensitivity of allowing the country’s telecoms market to go from four to three players, the view of Brazil’s government will weigh heavily in the deal calculus. Having fewer operators can lead to higher prices for consumers, and regulators in the U.S. have blocked similar four to three deals although three have gone ahead in Europe in recent years.

Another key hurdle is the expiry of Oi’s fixed licences in 2025, which creates uncertainty over its asset base and valuation. Talks to solve that could last until before the summer, one source said.

Other complications are Oi’s high debts, its complex corporate structure, as well as so-called universal obligations that the government has put on Oi to provide services across the entire country and weigh on its cost base.

Telecom Italia has decided to focus on boosting its own network investments in Brazil and will continue to carry out an internal analysis of a TIM-Oi combination, a source said.

Telecom Italia is aiming for 51 percent of the combined entity, and documents reviewed by its board in November showed potential synergies worth up to 9 billion euros.

Over the last week, Patuano said the moment was not ripe for an acquisition in Brazil and announced plans to invest “significantly more”. (Editing by Leila Abboud and Elaine Hardcastle)

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