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SAO PAULO – In another big step to get out of judicial recovery (RJ), Oi (OIBR3; OIBR4) sold its mobile phone operation (Oi mobile) to the consortium formed by Vivo on Monday (14) (VIVT3), TIM (TIMS3 ) and Claro for R $ 16.5 billion. The auction, organized by the Rio de Janeiro Court of Justice, lasted only thirty minutes and had no competition, confirming investors’ expectation that there would be no dispute over assets, after the consortium covered Highline’s proposal.
Oi reformulated its judicial reorganization plan this year, which was approved by creditors in September and ratified by the judge serving RJ in October. The backbone of the new plan is the asset auction, where the cash should eventually pay off creditors. To carry out the task, the plan divided Oi into five parts, called Isolated Productive Units (UPI): mobile telephony (Oi mobile); infrastructure towers (or InfraCo, which includes fiber optic operation); Cable TV; and data centers.
The first auction, for towers and data centers, was held on November 26 and raised R $ 1.4 billion.
On Monday the second auction was held, of the mobile operation. In the middle of the year, mobile assets attracted an offer above the stipulated minimum value of R $ 15 billion, from Highline, which belongs to the global investment company Digital Colony, but the consortium formed by Vivo, Tim and Claro covered the proposal. .
Next year, Oi should hold the auction to sell the pay TV unit, considered less relevant.
On Tuesday (8) of last week, Bernardo Winik, Vice President of Clients of the Oi group, said at a press conference that the company expects to receive between January and February a binding offer for the 51% stake of InfraCo and the auction must performed in the first trimester. In an interview with the TeleSynthesis website, specialized in the sector, in August, the general director of the company, Rodrigo Abreu, said that the company expects to receive at least R $ 9 billion from the sale of control.
Also read: After all, will Oi recover? See why auctions and fiber optics can redeem the operator
Fiber optics are the eyes of Oi. Unlike mobile telephony services, which are subject to constant criticism from customers, residential fiber optics (market known as fiber to the home, or FTTH) is the most profitable and promising operation of the operator today.
Outlook for Oi
Last week, Bradesco BBI reiterated the positive vision of telecommunications companies, strengthening Oi as the main option in the sector in Brazil and raising the target price from R $ 3.10 to R $ 3.40 for OIBR3 papers. towards the end of 2021, which represents a 44% potential for appreciation compared to Friday’s close.
For the BBI analysis team, even after the strong increase of more than 170% in accumulated assets in 2020 (from 174% for OIBR3 and 185% for OIBR4, until last Friday), there is still a profit margin, highlighting the attractive valuation, more rational competition, short-term triggers (such as the sale of mobile assets), among others. Analysts also highlight the strong advance in the residential fiber optic segment (or in the jargon of the FTTH market, from English fiber to the home), in which Oi is already a leader in 13 capitals.
Analysts also updated the model taking into account the debt update of the National Telecommunications Agency (Anatel). At the end of November, the telecommunications group had a discount of practically 50% on the debt of R $ 14.3 billion reais with the Federal Government and can still divide the remaining amount, reported the Office of the Attorney General of the Nation ( AGU) – see more by clicking here.
According to BBI, even greater debt forgiveness with the Union can also be a major catalyst for stocks. This is because the company can still migrate the debt to the New Bankruptcy Law, recently approved in the Senate and pending presidential approval, which could further increase the discount on the amount owed to the government, up to 70%.
Furthermore, they believe that Oi should keep up with the rapid pace of FTTH expansion, adding approximately 140,000 connected households per month. Oi’s plan to reach 14 million households by 2021, along with a better average income per user (ARPU) and a higher absorption rate than initially expected, should see income grow by approximately 9% year-on-year. in 2021, as well as the possible revaluation of assets, which are expected to receive binding offers from January 2021, assess BBI analysts.
It should be noted that Oi reported last week that it doubled its customer base in eight months. “We left 700 thousand clients at the end of 2019, one million at the beginning of 2020 and now we enter December with this good news of two million total clients,” Bernardo Winik said at a press conference, highlighting that this is the central pillar. in the company’s strategy for the coming years.
The executive also noted that Oi reached the 9.2 million fiber optic mark in December, one million above the company’s original estimate, with 134 cities served. “The performance was well above expectations when we designed the project, it is a reason for Oi to be very proud.” See more by clicking here.
BBI analysts also point out that, “in terms of profitability, with a solid cost control and voluntary redundancy plan, with the objective of saving from R $ 200 million to R $ 300 million in 2021, Ebitda growth is expected [lucro antes de juros, impostos, depreciações e amortizações] of 31% in the annual comparison in 2021. Finally, we see the end of the judicial reorganization plan next year, which may lead more investors to look at OIBR3 ”.
If the end of the judicial reorganization occurs in 2021, it will be no small thing. Oi filed for bankruptcy in June 2016, with a debt of R $ 64 billion – the second largest RJ in history, only behind Odebrecht, with a debt of R $ 98 billion.
Fabrício Lodi, a professor at the 10% Project, a school of merchants, also believes that, with auctions, Oi can pay off its debts and finalize the Judicial Reorganization process for next year, becoming sustainable again from 2022 or 2023.
Lodi also notes that much of the credit for Oi’s new RJ plan can be attributed to the company’s current CEO Rodrigo Abreu, a former president of Cisco and TIM, and a name respected by the market. “In June, he said that the new plan would have the objective of reducing debts to zero and increasing the value of Oi five times, taking the shares to a level above R $ 5. At the moment, the signs indicate that it could fulfill the promise. “
Check out the timeline with Oi’s story:
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