Brazilian telecom major Oi SA to raise $1 bn through asset sales

Brazil's largest telecommunications group Oi SA is selling submarine cable units and towers to raise approximately 2.43 billion reais ($1.07 billion) in order to strengthen its balance sheet.

The sale includes 22,500 km of undersea cables to a private equity fund run by Grupo BTG Pactual for 1.75 billion reais.

The transaction is subject to regulatory approvals in Brazil, Venezuela, Colombia, Bermuda and the US, where the cable units known as Brazil Telecom Cabos Submarinos Ltda and GlobeNet operate, Oi said in a securities filing.

Besides, the commercial rights for the use of 2,113 telecommunication towers have been sold to SBA Torres Brasil Ltda for 687 million reais.

The transaction is expected to bring direct benefits to Oi through the optimisation of resources and transfer of operation and maintenance costs to SBA, while SBA will lease space and towers for the benefit of Oi and its subsidiaries through long-term contracts, Oi said.

Rio de Janeiro-based Oi is Latin America's second-largest telecommunications company and Brazil's fourth-largest mobile operator. The company was formed through the restructuring of Telemar Participacoes' former operating divisions Brasil Telecom, Tele Norte Leste Participacoes, Coari Participacoes and Telemar Norte Leste.

Oi and its subsidiaries offer local, long distance and international voice and data services, besides a growing mobile phone network. As of March, Oi had a revenue base of 18.4 million residential subscribers, 46.6 million mobile customers, 8.9 million business clients, and 716,000 public telephones. The group has around 44,000 employees.

The company reported strong results in the first quarter with a net profit of 262 million reais, well above analysts' expectations, although the results were not comparable with the year-ago quarter due to the group's restructuring.

However, Oi's debt burden has increased due to its heavy capital expenditure plan. The debt has risen by 10 per cent since the end of last year while capital expenditure during the period soared 55 per cent to 1.7 billion reais.

The company's net debt-to-earnings ratio was 3.05 at the end of the quarter, about three times the average figure for Latin American telecommunications companies, according to Bloomberg data.

Further to the news, Oi stock jumped 10 per cent to close at 3.67 reais yesterday on the Brazilian stock exchange. The shares have plunged 55 per cent since the beginning of the year.