Altice makes €7B bid for Portugal Telecom

Altice launched a fully financed €7 billion ($8.8 billion) offer to buy Portugal Telecom from Oi in a move that could also boost the Brazil-based group's plan to focus on a joint bid for Telecom Italia's TIM Brasil unit.

Multinational cable and telecoms operator Altice, which has only just won approval to buy France's SFR, said it has offered to buy the existing business of Portugal Telecom outside of Africa, but is not including Portugal Telecom's Rio Forte debt securities, Oi treasury shares, or Portugal Telecom financing vehicles in its bid. If the offer is accepted, Altice said the transaction would be financed by new debt and existing cash.

The group controlled by billionaire Patrick Drahi has made no secret of the fact that it is looking at opportunities in every country where it is present and is a strong advocate of fixed and mobile convergence as well as in-market consolidation. In Portugal, the company already operates Cabovisao; the addition of mobile and fixed assets from Portugal Telecom, which provides converged offerings under the MEO brand, would complement its existing cable services.

"Altice needs a 'strategic' solution for Cabovisao, and M&A is one such option," Jefferies analysts said, noting that the Cabovisao business "has been materially under-performing its fixed-line competition."

Speculation that Altice would offer to buy Portugal Telecom first emerged in early October, and coincided with the resignation of the then CEO of Oi, Zeinal Bava. If successful, the Altice bid could also bolster Oi's plans to drive the consolidation of the mobile market in Brazil.

Indeed, it was reported last week that Oi, America Movil, and Spain's Telefónica agreed to place a joint bid worth around BRL32 billion (€10 billion/$13 billion) for TIM Participações SA, the Brazilian unit of Telecom Italia.

According to Reuters, Telecom Italia had yet to receive any offer for TIM Brasil, chairman Giuseppe Recchi said on Friday.

In Jefferies view, the offer by Altice has got the ball rolling on Brazilian mobile consolidation: "The primary driver for the Portuguese divestment is to improve financial flexibility in advance of launching an Oi-led bid for TIM Brazil [sic]," the analysts said.

However, Jefferies noted that because the Portuguese divestment gives Oi only 19.1 billion reais of cash, "we wouldn't immediately assume that the Portuguese divestment pre-disposes Oi towards a successful TIM Brazil [sic] take-out, but it does at least move it materially closer."

It has previously been speculated that Telecom Italia, which has so far stressed that TIM Brasil is a strategic asset, would be more open to selling the unit if its plan to buy Brazilian fixed-line operator GVT fell through. In August, Vivendi confirmed that it had entered into exclusive negotiations with Telefónica on the Spanish company's offer to buy GVT.

For more:
- see this Altice statement
- see this Reuters article

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