Oi puts $2.8bn price tag on its mobile business

Brazilian converged telco Oi has said it will be moving forward with the sale of its mobile business unit, listening to offers which exceed 15 billion Brazilian Real ($2.8 billion).

Although Brazil has traditionally been one of the potentially lucrative BRIC nations (Brazil, Russia, India and China), it is a very difficult market for the telecoms industry to crack. With the rest of the world driving towards a converged business model, where multiple connectivity products are bundled in a single package, Oi is having to reverse this position to source some much needed funds.

The financial troubles of Oi have been well reported over the last few years, though now it appears the business has hit the point of no-return. Few telecoms operators would want to divest assets, but with net debt currently at 18.1 billion Brazilian Real ($3.4 billion), occasionally needs must.

As part of the divestment, Oi will begin the process of separating its operations into silos (mobile, data centres, towers and broadband) before starting a sealed envelope bidding process for the mobile unit. The highest bid will be accepted, assuming it above the minimum accepted price, though there is scope to accept the second highest if it is within 5% of the highest and offers ‘greater legal assurances and certainty for the closing of the sale’.

Although the company is sitting in third for market share in mobile and second in broadband, as you can see from the table above, it has not been a great few years. With revenues declining year-on-year, debt rising and subscriptions decreasing, the equation is not a healthy one. In short, all the numbers are heading the wrong direction.

Unfortunately for Oi, it has seemingly made the difficult decision to revert back to being a pureplay connectivity service provider. What remains to be seen is how much of an impact this will have on its competitive offering.