July 16, 2019 / 1:09 PM / a month ago

UPDATE 2-Brazil carrier Oi to raise $2 bln by selling non-core assets to focus on FTTH

(Adds executives’ comments and share performance)

By Gabriela Mello and Carolina Mandl

SAO PAULO, July 16 (Reuters) - Brazilian telecom carrier Oi SA disclosed on Tuesday a new strategic plan aiming to divest up to 7.5 billion reais ($2 billion) in non-core assets and focus on its fiber-to-home (FTTH) broadband service.

The company, which filed for bankruptcy protection in June 2016 to restructure approximately 65 billion reais of debt, plans to sell towers, data centers, real estate assets, its Angolan subsidiary Unitel and other non-strategic assets between 2019 and 2021.

“We’re now as we speak working on the sale of real estate assets,” Chief Financial Officer, Carlos Brandao, said in a conference call to discuss the newly launched strategic plan with investors and analysts.

He added Oi is confident it can fulfill the divestment plan within the timeframe and release cash to finance the expansion of its FTTH network, which according to Brandao is “the heart” of the company’ strategy.

The carrier expects to hit 16 million homes-passed in FTTH by 2021 compared to 4.6 million in 2019, in order to provide broadband, wholesale, TV and mobile services to both individual and corporate clients, according to a presentation released on Tuesday.

The transition to fiber broadband is likely to translate in better results going forward, as the average revenue per user (ARPU) in FTTH is already over 20% higher than in copper network and maintainance costs are significantly smaller, Oi’s marketing director Roberto Guenzburger said in the call.

“75% of our customers in FTTH are new to the platform and 25% are migrating from copper,” he added.

Oi said in a filing it sees revenues rising above 2% per year between 2019 and 2024. The company also expects earnings before interest, taxes, depreciation and amortization (EBITDA) to grow up to 20% per year between 2019 and 2021. Ebitda is projected between 4.5 billion reais and 5 billion reais in 2019.

Analysts at Itau BBA said in a note to clients Oi’s plan is “ambitious”, but emphasized the company’s decision to sell assets is the “correct path for generating shareholder value.”

Common shares in Oi erased earlier gains and were trading down at the Sao Paulo stock exchange, after rising around 5% in the morning. Preferred shares were up 0.5%.

The carrier has hired Boston Consulting Group, Oliver Wyman and Bank of America to outline its strategic plan.

$1 = 3.7587 reais Additional reporting by Paula Arend Editing by Alistair Bell

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