There are renewed rumors that Chinese firms could be interested in buying all or part of struggling Brazilian telecoms firm Oi, in a bid to expand China's footprint in the industry in Latin America’s largest economy.

Over the weekend, Brazilian paper O Globo reported that Huawei could be teaming up with China Mobile to make an offer for Oi. However, Huawei bluntly denied that and said in a statement it has no plans or interest in acquiring Oi or any other Brazilian carrier.

Huawei is one of the key suppliers of telecom equipment used by Oi, which has been in judicial reorganization since 2016 and has a strong need for cash and fresh money to prevent having to halt operations. 

Huawei also confirmed recently plans to make US$800mn in investments over the next three years in São Paulo state, which could include building a factory.

The presence of Chinese players in different Brazilian industries is significant and growing – to the point where President Jair Bolsonaro declared that China was interested in “buying Brazil”.

The biggest M&A deal in Brazil last month, according to data from Transaction Track Record (TTR), involved Brazilian power holding CPFL Energia spending US$983mn to buy shares from its parent State Grid Brazil Power Participações in renewables-focused subsidiary CPFL Renováveis. State Grid Brazil is controlled by Chinese company State Grid.

Among the transactions made by internet companies in Brazil in the second quarter of this year, 36 were domestic, 23 were acquisitions by foreign groups and four were acquisitions by Brazilian companies abroad, according to a KPMG report.

But the Chinese footprint in Latin America’s biggest telecom market is almost non-existent. 

The three biggest mobile players in the country are controlled by groups based in Spain (Telefónica), Mexico (América Móvil) and Italy (TIM). The fourth major mobile player in the market is Brazil’s Oi.

And yet the interest of China Mobile and other Chinese telcos in Brazil is not new.

In 2017, when there was another round of rumors about Oi being acquired by a local or foreign player, state-run telcos China Mobile and China Telecom confirmed their interest in the carrier. At the time Oi admitted that it had held talks with China Telecom. 

This set off alarms at Telefónica and América Móvil, among others.

“This China business is complex. We hear about it, read about it, but they operate in a dynamic that's different from the Western world. I look at it with concern," the CEO of América Móvil in Brazil, José Félix, told journalists then.

"I don't know what they're going to do here. In China, business and government are a little mixed. Who are we going to compete with, run against? With the Chinese government or with a company?" he added.

Some of the concerns are that Chinese groups could kick off a price war by offering very low prices.

INTERNET, E-COMMERCE

Internet and e-commerce are also potential areas of interest for the Chinese in Brazil. 

Chinese e-commerce giant Alibaba, for instance, is reportedly in talks to buy control of the concession for Brazil's Viracopos airport, which serves the city of Campinas in São Paulo state.

Through Global Logistic Properties, Alibaba made an offer to the controllers of the concession for a value that was not disclosed, local newspaper Folha de S. Paulo reported, citing sources involved in the talks.

Alibaba's move seems to make sense from a logistics standpoint, as Campinas is an important tech hub in the state and is about an hour's drive from capital São Paulo, the largest consumer market in Brazil’s richest and most populous state.

The deal would also come at a time when global Alibaba rivals such as Amazon and MercadoLibre are stepping up their investments in Brazil.

There could also be opportunities for companies like Tencent, Alibaba and WeChat to enter the hotly disputed area of electronic payments by buying a local player or a stake in one of them if this segment advances towards consolidation.

Source: Business News Americas / BN Americas - Chile