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Four contenders for Brazilian telco Oi’s fiber broadband base

With less than two weeks to go before the competitive process concludes, the dispute for Brazilian telco Oi’s fiber customer base narrowed down to a handful of companies backed by local funds or traditional investors in the telecoms market.

Oi had announced that the tender for its fiber broadband base company ClientCo will be held on July 17. The process will be carried out electronically and is part of the telco’s second judicial reorganization process, a type of bankruptcy protection.

ISPs Vero and Brasil TecPar are rumored to have formalized their participation in the process. Backed by Vinci Partners, Vero last year merged with Americanet to create one of the largest fiber internet providers in Brazil.

Founded in 2009, Vinci Partners is focused on alternative investments, with 69bn reais (US$12.5bn) in assets under management. It created Vero from the acquisition and a combination of several smaller internet providers in Brazil.

Brasil TecPar, for its part, had been negotiating the entry of a strategic investor or a business combination with another operator – in the Vero-Americanet model – but to date has no large fund backing it.

According to the rules of the tender, V.tal, the neutral fiber network controlled by funds linked to BTG Pactual and in which Oi has a stake, will be able to bid in the second round.

A fourth contender is Ligga, which managed this week to sign up to the process following a court decision, even after the deadline for registration had passed.

Ligga has Brazilian telecoms investor Nelson Tanure behind it and was negotiating a separate M&A process with V.tal, as first reported by BNamericas.

BNamericas has learned that Vero and Ligga are the ones with greatest risk appetite for the deal, although a financial market executive with knowledge of the process said anything can happen.

“I’d not rule out any U-turn, new late entrants, or any other turnaround in this process,” the source said, requesting anonymity.

Oi expects to receive 7.3bn reais for ClientCo, which includes the customer base plus associated fiber equipment in customers’ premises, among other assets.

Oi’s national fiber backbone (InfraCo), or the fiber core transportation network, had already been partially sold during the company’s first judicial recovery process to create V.tal.

There is talk in the market that the ClientCo value could be lower, given the depreciation of Oi’s assets, the lack of substantial investments in the business, and, mainly, the loss of its customers.

Oi ended May with 4.35mn fiber broadband customers, down 0.5% on a year earlier.

Fixed concession
Oi, meanwhile, secured a key legal ruling.

Brazil’s federal audit court (TCU) unanimously approved the proposal for a settlement with regulator Anatel regarding Oi’s lossmaking fixed telephony concession.

Essentially, TCU’s decision brings Oi closer to amicably terminating its fixed telephony concession contracts and transitioning to the authorization model. This shift is expected to allow Oi to reduce regulatory costs associated with the concession.

The migration, however, also involves assuming certain minimum and additional obligations outlined in the settlement.

Oi will have to pay at least 5.8bn reais to the government to offload the concession.

The amount corresponds to so-called reversible assets – those received at the time of privatization as part of the concession award. Bnamericas

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