Will Vivo acquire Telemig Celular?
The year of 2002 started a new phase of cellular telephony in Brazil. With new SMP licenses, the number of competitors in each area of service provider increased from 2 to 3 or 4 and Oi initiated its operations in Region I. These changes had taken the consolidation of regional operators in great operators with national operation, as Vivo, Tim and Claro.
Telemig and Amazônia Celular, which had not been part of this consolidation process, had its market participation decreasing in its operation areas. Telemig Celular had in 2002, 57.8% of cellular market share in Minas Gerais, saw its participation decrease to 30.4% in June/2007. Cellular growth of both operators was from 2.9 million to 4.8 million in that time or 68.9% against 247.6% of total growth in its service areas.
The competition in Minas incited with the entrance of Claro in the end of 2005. In June/07 Telemig still was leader in Minas Gerais, but its advantage in relation to Tim was only 1.3 percentile points.
The same happened with Amazônia Celular, which operates in the following States: Amazonas, Pará, Maranhão, Amapá and Roraima. Amazônia Celular lost leadership in area 8 being surpassed by Vivo and Tim.
According to this situation, Telemig and Amazônia Celular sale are almost certain since the beginning of 2005. It had, however, to wait the substitution process of Opportunity as manager of these operators which started in Mar/05 and finished in Sept/06.
In 2007 the perspective of sale increased market cap of Telemig Participation and Tele Norte Celular, holdings of Telemig and Amazônia.
The sale process is being done by Merryl Lynch ( investment bank) and the proposals were handed in July/2007.
Vivo and Claro were pointed as main candidates to acquire Telemig Celular and Amazônia Celular. This acquisition would give to Claro cellulars market share leadership in Brazil. (more details).
New reported by press in 07/26/07 indicate that Vivo is taking advantage and its really close to buy these operators.
With this acquisition Vivo would have 30.2 million cellulars Jun/07 to 35.1 million, increasing its margin in relation to Tim (27.5 million) and Claro (26.3 million). It also recovered leadership in net revenue lost to Tim in 2Q07 (more details).
With Telemig Celular's acquisition Vivo would also operate in Minas Gerais solving its coverage problem in this important area in Brazil.
Telemig and Amazônia Celular transference of control has to be approved by Anatel and CADE (regulators in Brazil). In case of acquisition, Vivo will have to return its license of Amazônia Celular to area 8.
Although Vivo being the favourite to acquire these operators, cannot be discarded the possibility of Citi and Pension Founds, main shareholders of these operators, to decide getting another solution: the incorporation of Telemig and Amazônia celular to a new operator that would appear with Oi and BrT joint venture.
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