June 30, 2017 / 7:28 PM / 20 days ago

Exclusive: Five companies eye Brazil's Cemig Telecom, sources say

SAO PAULO (Reuters) - Brazil's No. 1 wireless carrier Telefónica Brasil SA (VIVT4.SA) and fiber-optic service provider Globenet Inc are among at least five industry players looking at the fiber-optic arm of Cia Energética de Minas Gerais SA (CMIG4.SA), which put the unit on the block to cut debt, three people with direct knowledge of the process said.

Other companies looking at assets of Cemig Telecom, whose fiber optic network stretches 9,500 km (5,900 miles) across five Brazilian states, are Vogel Soluções SA, Algar Telecom SA and infrastructure funds managed by UBS AG (UBSG.S), the people said.

The sale could close as early as October, two of the sources said. Parent company Cemig has hired the investment banking unit of Banco Bradesco SA (BBDC4.SA) to conduct the auction, the people said.

The sources, who requested anonymity because the process remains private, did not give an estimate for the value of Cemig Telecom. The sale is part of parent Cemig's plan to divest 6.5 billion reais ($2 billion) in assets and refinance 4.8 billion reais of debt by year-end.

The potential bidders and Cemig had no immediate comment. Bradesco declined to comment.

For a year, Cemig has struggled to decide what assets to sell, underscoring the difficulties of downsizing after growing rapidly. Some of the conglomerate's acquisitions over the past decade, ranging from gas distribution to information technology, have underperformed.

Looming Debt

Cemig's preferred shares reversed early gains, shedding 0.4 percent to 8.06 reais on Friday, paring back year-to-date gains to about 7.4 percent.

The power utility, Brazil's third-largest, is controlled by the state of Minas Gerais. Reuters first reported discussions about selling Cemig Telecom in December.

Cemig's outstanding bank loans and other obligations have tripled to 13 billion reais since 2012, when a federal government decision to renegotiate power contracts depressed the value of electricity assets and hampered returns. Eighty percent of Cemig's debt comes due by 2019.

Buying Cemig Telecom could provide a fiber-optic service company with a foothold in one of the world's most populous countries and negotiate better fees with large users, the people said.

Telefónica Brasil and other carriers have doubled down bets on fiber optic players in recent years as demand for data packages surged.

Editing by Lisa Von Ahn and Richard Chang

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