October 30, 2015 / 11:57 AM / 4 years ago

UPDATE 2-Brazil Oi in exclusive talks with LetterOne for merger with TIM

(Adds LetterOne confirmation, share price)

By Walter Brandimarte and Maria Kiselyova

SAO PAULO/MOSCOW, Oct 30 (Reuters) - Brazil’s telecommunications group Oi SA and investment firm LetterOne said on Friday they entered exclusive financing negotiations for a merger with rival TIM Participações SA .

LetterOne, controlled by Russian billionaire Mikhail Fridman, had offered earlier this month to pour up to $4 billion into debt-ridden Oi if it merges with TIM, creating the largest wireless carrier in Brazil.

Oi said it sent a counteroffer to the Russian investment firm asking for talks to remain exclusive for seven months as of Oct 23. LetterOne accepted the proposal, a spokesman for the company in London told Reuters over the phone.

“We are exploring proposals together to develop viable structuring and financing options that would enable Oi to participate in any consolidation of the Brazilian telecommunications sector,” the spokesman said, adding talks are at a “preliminary stage.”

Oi’s common shares jumped more than 5 percent on the São Paulo stock exchange, later trimming gains to a rise of 2.6 percent. TIM shares were up 1.8 percent.

Oi said a merger with TIM, owned by Telecom Italia Spa , would reduce its debt leverage and result in meaningful synergies.

“A potential tie-up between Oi and Tim Participações would create a stronger and better positioned carrier, able to compete with global players already operating in Brazil,” Oi said in a securities filing.

It is still unclear whether Telecom Italia is open to a tie-up and whether Brazilian antitrust authorities would approve it.

Brazil’s Communications Minister Andre Figueiredo told local business daily Valor Economico on Friday that he is seeking alternatives to avoid a reduction in the number of telecom companies that could hurt consumers. The Brazilian market has room for even more carriers, he said. (Reporting by Walter Brandimarte in Sao Paulo and Maria Kiselyova in Moscow; Editing by Chizu Nomiyama and W Simon)

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