Telecom Italia to assess possible merger of Brazil unit with Oi

The board of Telecom Italia has given the go ahead to management to look at the possibility of merging its Brazilian operations with those of smaller rival Oi, a deal that would shake up the wireless market in Latin America's largest economy.

A combination of Telecom Italia's Brazilian unit TIM Participacoes and Oi would be the largest mobile carrier in Brazil by subscribers, larger than Telefonica's Brazilian unit.

The go-ahead comes as the battle for a leading position in Brazil's telecoms market has been intensifying, particularly around the future of TIM Participacoes.

Spains' Telefonica is acquiring GVT, the Brazilian broadband provider, from Vivendi for about $9bn and has been linked with a potential role in the purchase and break up of TIM Participacoes, in which Telecom Italia owns two-thirds. In September, Mexico's America Movil said it was in talks to bid for a controlling stake in TIM Participacoes along with Oi.

In a statement, the board said it had also requested management look at merging its Italian broadband operations with those of local player Metroweb, a city based broadband system owned by an Italian state investment fund.

Telecom Italia is struggling to find a strategic solution, potentially through a merger in Brazil, to offset falling revenues in Italy and also to find a solution to low broadband penetration at home.

"Telecom Italia identifies Metroweb as the partner with which is could quickly create the development plan for the new generation network in optic fibre at a national level," the company said.

It has said in the past that Metroweb would be among its options as an acquisition target, emphasising that there needs to be consolidation in the domestic industry, but identified possible price and antitrust issues that would need to be solved.

High speed broadband penetration is low in Italy. Telecom Italia which controls a third of the mobile market trails in 4G with just 2 per cent of its subscribers on the fastest wireless standard.

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