Oi SA, Brazil’s fourth largest wireless carrier, received approval from CADE, Brazil’s antitrust regulator, on the sale of a 57.9% stake in its fiber optic infrastructure unit, known as V.tal (formerly UPI InfraCo), to GlobeNet and GIC, Singapore’s sovereign wealth fund, as part of investment funds managed by BTG Pactual.
Oi SA anticipates closing the transaction in either Q4 2021 or Q1 2022, given that completion remains subject to the consent of Brazil’s telecommunications agency, ANATEL.
V.tal (UPI InfraCo) – Oi SA’s Sale to GlobeNet, GIC, BTG
Recall that GlobeNet, GIC, and BTG valued V.tal (UPI InfraCo) at an enterprise value of R$20.0bn ($3.5bn USD). In turn, GlobeNet and GIC will acquire a 57.9% stake in V.tal (UPI InfraCo) for consideration of R$12.9bn ($2.3bn USD), which will take the form of cash and a merger with GlobeNet.
Initially, GlobeNet is acquiring a 57.9% stake in Oi SA’s V.tal through the entity Globenet Cabos Submarinos SA. Subsequently, GlobeNet will sell to GIC, which is investing through the entity Warrington Investment Pte Ltd, an interest of 9.9% in V.tal. Overall, GlobeNet is funding ~$1.9bn USD of the transaction consideration, while GIC is contributing ~$400m USD.
GIC – Algar Telecom
GIC also owns a 25.3% minority interest in Algar Telecom, a regional wireless carrier and fixed broadband provider in Brazil. Similar to Oi SA, Algar Telecom provides fiber broadband services. However, the company only commands a ~2% fixed broadband market share.
Fixed Broadband Market Share in Brazil
Nevertheless, CADE reviewed the implications of a future combination between Algar and Oi’s V.tal, given GIC’s shareholding in both companies. In the end, CADE concluded that any coordination between Oi’s V.tal and Algar Telecom would not give the companies enough market power to harm competition. This is because their combined market share would remain below 20% (i.e., 15.2% based on ANATEL data).
V.tal (UPI InfraCo) – Oi SA’s Fiber Infrastructure
V.tal comprises the largest fiber optic network in Brazil, with 250k+ miles (400k+ kilometers) of fiber network throughout the country. Further, the company plans to invest R$30.0bn ($5.75bn USD) through 2025, to grow both its transport and fiber-to-the-home (FTTH) network.
Presently, V.tal’s long-haul network connects 2.3k+ municipalities in Brazil, while its fiber-to-the-home (FTTH) network passes 12.0 million homes nationwide.
V.tal plans to grow its wholesale services by offering fiber optic connectivity, through an open-access and neutral network model. On a wholesale basis, V.tal’s fiber network will be offered to numerous market participants. Specifically, these include other carriers (e.g., regional operators and internet service providers), over-the-top (OTT) media service providers, tower companies, content delivery networks (CDNs), and cloud service providers, amongst others.