January 29, 2015 / 10:05 PM / in 5 years

Brazil has no favorites in possible telecom tie-up -source

BRASILIA, Jan 29 (Reuters) - Brazil’s government has no preferred model for consolidation of the country’s telecom market, a source told Reuters on Thursday, leaving behind the days when Brazilian telecom company Oi SA was held up as a “national champion”.

As long as companies continue investing in their networks and offering competitive services, the government is not concerned about the widely anticipated shift from four major carriers to three, the source said on condition of anonymity.

Oi has been in talks with Spain’s Telefonica SA and Mexico’s America Movil SAB about making a joint bid to buy rival TIM Participações SA and dividing it three ways.

TIM majority owner Telecom Italia SpA, however, is also mulling a takeover of Oi, raising questions about which option might be favored by the government, which has played an active role in the industry in recent years.

President Dilma Rousseff’s predecessor and political mentor Luiz Inacio Lula da Silva championed the merger that created Oi in 2008 as the birth of a national “super telecom” that could go toe-to-toe with foreign rivals Telefonica and America Movil.

But the grand plans for Oi carry less weight in Brasilia now that the company has slid into fourth place in the mobile market, while its debt levels have soared and service quality has fallen short of regulatory standards.

Last year, Oi merged with key shareholder Portugal Telecom SGPS in a deal that quickly soured on news of a bad investment in a Portuguese banking family’s crumbling industrial empire.

Earlier on Thursday, Telecom Italia’s chief executive met with Brazil Communications Minister Ricardo Berzoini, but he told reporters they had not discussed a prospective merger.

Writing and additional reporting by Brad Haynes; Editing by Peter Galloway

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