Telefónica seeks reduced price for Oi’s assets auctioned in Brazil

TelefónicaTelefónica seeks reduction in price for Oi's assets

Renta 4 | Telefónica Brasil (Telefónica (TEF) 74,2%) finalised the acquisition of Oi’s assets which corresponded to the Spanish firm for a total of 1.063 billion euros.

Telefónica Brasil paid some 966 million euros on the closing date of the transaction in April 2022. The payment of the remaining 10% is subject to specific price adjustments and potential indemnisation obligations.

Separately, Telefónica Brasil took on a commitment to make an extra payment of up to 23 million euros, subject to the fulfilling of certain goals on the part of Oi, of which 8 million euros were paid out on the closing date. It paid 29 million euros for certain transitory services and and signed an agreement related to data transmission capacity for some 35 million euros, paid monthly over a 10-year period.

According to the press, and adhering to KPMG’s calculations, who was the advisor for the deal, now some 92 million euros would correspond to Telefónica Brasil, as well as an additional payment of 111 million euros from Oi. So in total, Telefónica Brasil should receive 203 million euros. This is about 20% of the value of the deal, and 602 million euros to the 3 companies (TIM y Claro) who won Oi’s assets in the auction.

Valuation:

Oi’s share price fell 10% in Brazil yesterday, Monday. That said, the management has rejected the pretensions of the 3 buyers. We expect a moderately positive impact for Telefónica. Target Price 5,1 euros. Overweight.

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