Portugal Telecom and Hi, anyway, together

The dream of national supertele also would act as a ' telecommunication ' Brazilian multinational ended yesterday with the announcement of the merger between Portugal Telecom and Hi. The Union CorpCo, which will integrate the assets of the two groups, but under control of the Portuguese partners. The Portugal Telecom enters with its business lines of fixed telephony, mobile, broadband and pay-TV, present in the Portuguese market and also in Angola, Unitel, Namibia (MTC), Cape Verde (CVT), São Tomé and Príncipe (CST) and in East Timor (Timor Telecom).
The ' marriage ' is a company with annual revenue of $ 37,500 billion, less than the net debt of R $ 45.6 billion. Investments totaled R $ 8.6 billion and reach the ' dowry ' includes 100.25 million residential and business customers of all service lines. Of the total, 74.75 million subscribers are from Hi.
A few years ago to pave the way for a national supertele, the Brazilian Government launched hand of several features, including changes to the General plan for telecommunications (LGT), in 2008, which facilitated the Union of Brazil Telecom and Telemar, giving rise to Hi. It didn't work and now comes into play the largest Portuguese language tele.
Brazilian Government sources minimized, in recent days, the possibility of the Brazil stay without a national carrier. "The important thing was to save the Hi and keep her from becoming a takeover target for another Brazilian operator, increasing the concentration of the market," said an adviser to the National Telecommunications Agency (Anatel).
The merger was one of the most awaited operations of the telecommunications industry. The expectation has gathered strength from the entrance of the President of Portugal Telecom, Zeinal Bava Bava, in charge of Hi, in June. With the agreement, which involves a capitalisation of up to $ 8 billion, the Portugal Telecom gained more power in Hi, predictably, and makes room for the output of the two main groups-shareholders Jereissati (La source) and apart from Andrade Gutierrez, dilution of pension funds and the operator's capital from BNDES.
The capital of the company will be pulverized and without a controller, for now. Bava avoided saying yesterday as believes will be the participation of the current control group. "It's completely irrelevant now the definition of how shareholders are investing," he said. "It's important to say that we will have a stable shareholder base." Managers are expecting regulators authorization until December and the completion of the merger until June 2014.
From now on, the challenge of Portugal Telecom is promoting a "management shock" at Oi, in the opinion of industry experts heard by the Value. The main points to be attacked are updating the technological basis of the carrier, the improvement of administrative and network operations.
"Until today, Oi was controlled mainly by partners who were not part of the telecommunications industry," said economist Arthur Barrionuevo, a professor at the Getúlio Vargas Foundation. "Portugal Telecom earns more power within the Hi and respond more directly by the strategy. This may make the company more agile in making decisions ". The company has operational problems, involving the field service team, for example. "When the client calls asking for a pay TV service, ends up getting broadband," said an expert.
There is need for modernization of the infrastructure of the company. "Oi has the most extensive fiber-optic network in the country [are 230 thousand kilometers], but is focused more on the corporate market and not enough to the client's House," said Renato Pasquini, consultant of Frost & Sullivan. "Accordingly, the company is behind major operators that offer the service at the national level, as the Net".
In Europe, Portugal Telecom became a reference with the advanced fiber-optic network that offers broadband and pay-TV. "The Portuguese offer applications on network TV, something that only now is beginning to be offered by Telefónica in Brazil," said Pasquini. The Meo package of TV, is considered to be example of synergy, by adding broadband, pay TV, fixed and mobile line.
In the cell phone market, Oi is the fourth operator, with 18.64 percent stake after Alive (28.7%), TIM (27.2%) and Claro (25%). "The distance is too large the other competitors," said Barrionuevo. In the comparison groups in Brazil, Oi is the third by number of subscribers, with 74.7 million among all services. Firstly is Telefónica, with 91 000, followed by América Móvil, 90.8 mil and TIM, 72 thousand.
For Oi's competitors, part of the expected synergy gains for the merger will be observed from the technological knowledge of the Portuguese operator. "The Portuguese have competence in installation of fixed network infrastructure," said the Executive at a rival operator. In Brazil, Oi, as well as other carriers, faces challenges for the installation of the external network. "It's an asset that requires constant investment, for being the target of vandalism and theft," he said. The cost is expensive because of the difficulty of achieving labor and the progressive reduction of the price of the packages. "The Bill does not close".
The promised synergy gains from the merger totaling $ 5.5 billion, must come, in good part, negotiations with suppliers. Bava did not say how soon and how synergies will consolidate. According to him, there are 80 operations mapped to be explored. "Many of the synergies it has to do with scale gain [operations]," he said. The first and most obvious of these was the opening of the company's data center, in Covilhã, Portugal, last week, that will work in conjunction with the Oi data centres in operation in Brazil.
The preliminary assessment of the market regarding the merger is that Portugal Telecom was the lifeline for the Brazilian. "Oi is Telecom Italia brasileira", said Marcelo Torto, of Active broker, referring to the Italian operator that accumulate a debt of € 28.8 billion. Hi sum debt nearly four times its earnings before interest, taxes, depreciation and amortization (Ebitda).