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Brazil's TIM says M&A not only option, plans fiber unit spinoff

SAO PAULO (Reuters) - Brazilian wireless carrier TIM Participacoes SA can thrive even if its joint bid for Oi’s mobile assets fails, Chief Executive Pietro Labriola said on Thursday, as the company foresees better results despite the pandemic.

“This potential transaction is not a do or die situation and we have conditions to thrive regardless of the outcome of this competitive process,” Labriola told analysts and investors on a call on second-quarter results.

TIM Participacoes and rivals Telefonica Brasil SA and America Movil’s Claro on Monday night raised their joint offer to acquire Oi’s mobile assets, including spectrum, to 16.5 billion reais ($3.20 billion) after the bankrupt carrier entered exclusive talks with another bidder.

“The deal is especially important for TIM, which would extract sizable synergies and potentially close the spectrum gap to its peers,” analysts at BTG Pactual said in a report.

But Labriola cited other options to add spectrum, with the government’s 5G auction of frequencies including 700 MHz and 2.3 GHz, expected next year.

“We are moving ahead with our strategy to gain efficiency and manage our spectrum gap in a clever way to provide the best coverage experience,” he said.

The local subsidiary of Telecom Italia SpA aims to spin off its fiber infrastructure business by year-end and is in talks with potential partners. “We’ve already signed many non-disclosure agreements,” he said.

The move follows an industry trend. On Wednesday, Telefonica Brasil also announced plans for an independent unit to build and offer neutral fiber network to wholesale customers.

TIM shares fell 0.8% to 14.78 reais, after posting a 23.9% drop in adjusted second-quarter net income.

TIM sees a challenging second half, but expects higher revenues in prepaid and post-paid mobile plans, Labriola said.

“July should be the second best month for prepaid recharging and we expect further improvement in coming quarters.”

Reporting by Gabriela Mello; Editing by Richard Chang

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