Oi expects up to US$1.7bn from divestments

Brazilian telecom operator Oi believes it can raise 6-7bn reais (US$1.76bn) with divestments and the sale of non-strategic assets.

The Rio de Janeiro-based carrier is working with three consultancies - Boston Consulting Group (BCG), Oliver Wyman and Bank of America (BofA) Merryl Lynch - and plans to release a new assets sales plan by June, CFO Carlos Brandão said in a Q1 earnings call with analysts and investors.

BCG was hired to review Oi's business strategy while BofA is responsible for prospecting and structuring operations for the monetization of Oi’s non-core assets, as well as assess potential mergers and acquisitions (M&A) opportunities.

Recently, Oi allocated 4bn reais for investments from a capital raise implemented as part of its judicial reorganization plan.

The company has 7bn reais yearly in capex earmarked for this year and the next, Brandão said.

In the first quarter, capex grew by 3%, to 1.72bn reais.

Oi ended March with a cash position of 6.27bn reais, almost flat year-over-year, and net debt of 10.1bn reais (up 38.8%), due mainly to higher gross debt, the company said.

The company had another quarter of revenue decline. In Q1, net revenue fell by 9.5%, to 5.13bn reais. Oi lost 2.58mn subscribers since March last year, totaling 56.6mn.

Oi attributes the struggles to an “intense competitive scenario” with regional internet service providers in the residential segment, particularly in fiber.

In B2B, Oi has been losing revenues in fixed voice and data (broadband). The company’s strategy to reverse the downward trend in the corporate segment is to expand the offer of digital and IT solutions.

The positive highlights in the quarter included a 9.3% growth in mobile postpaid and hybrid customer revenues and the milestone of 1.7mn homes passed with fiber (FTTH) by March, following 480,000 homes-passed additions during the quarter.

"Our focus is on accelerating fiber optic expansion. But this takes time to deliver a return on investment. We expect that for the next year. Fiber on access networks will be our main engine of growth, not only in the residential segment but in b2b, and also looking ahead to 5G," Brandão said.

The executive also said that there is further room for cost reduction (opex), mainly via the digitization of processes. In Q1, consolidated routine opex totaled 3.88bn reais, down 5.3% y-o-y and 5.6% q-o-q.

Oi's detailed results can be seen here.