Telefónica Brasil and TIM Participações are said to have expressed interest in buying the mobile unit of bankrupt Brazilian operator Oi, with the ultimate aim of divvying up the assets between their respective operations.

Reuters reported that the two operators have informed Oi's financial adviser, Bank of America Merrill Lynch, of their interest in starting negotiations. Oi confirmed that "third parties" interested in its mobile business had contacted the bank, although without naming names, and cited the move as a clear indication of market interest in its mobile operations.

The desire of Telefónica and TIM to expand their Brazilian mobile assets is understandable in today's competitive environment, although investors may not support plans to buy the mobile business of such a financially troubled operator.

Oi filed for bankruptcy protection in 2016, citing a debt load of $19 billion, and it still had a net debt of about $3.2 billion in November 2019 (at today's exchange rate), which is about 2.5 times its EBITDA in 2018.

Oi's debt, though, is peanuts compared to that of both Telefonica – carrying a hefty €37.7 billion ($42.6 billion) – and TIM, which has a debt load of €23.8 billion ($27 billion). As such, both operators are supposed to be working on debt-reduction strategies, rather than taking on more.

Oi had 34.7 million mobile subscribers at the end of the third quarter of 2019, but that number was 4.8% lower compared to the same period of 2018.

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— Anne Morris, Contributing Editor, Light Reading