Telecom company Oi invests R$120m in asset integration

Telecommunications company Oi is undertaking a new stage in its process of unifying the operations of Telemar Norte Leste and Brasil Telecom, companies that originated it. After a long process which started in 2008 and already included unification of teams, brands and operations, Oi estimates it will conclude by June the process of integrating inventories of fixed assets. The list includes buildings, towers, equipment, transmission-cable networks and centrals.

The integration started two years ago and demanded an investment of about R$120 million. “It’s a quite big project, but that will provide administrative and operating gains for Oi,” says André Borges, chief of regulation and strategy at Oi. The unified inventory will ease the management of company assets.

It’s not as simple a task as it may seem, because both Telemar Norte Leste and Brasil Telecom were themselves created from the consolidation of 25 state companies, which together held 26 concessions to operate in the states. “Everything was in excess, 26 headquarters, 26 logistics centers and a series of duplicated structures,” Mr. Borges says.

The project of replacing 23 systems of inventory management with a single one was developed with the support of Ernst & Young Terco and Apsis and involved 450 workers from Oi and the consultancies. According to Apsis, a large company has between 4 million and 5 million assets. In the case of Oi, the inventory already lists a few times this number. The investment made includes spending with consultancies, with trips and the development of customized software to meet the carrier’s technical demands.

Mr. Borges says the inventory development took into consideration specifications set by the National Telecommunications Agency (Anatel) to split assets between reversible assets — those that will need to be returned to the state when the concession contracts expire — and non-reversible assets, which remain with the company after the concession ends. Oi’s consolidated list of assets will be sent by June to Anatel, Mr. Borges says. The executive says that consolidate data of reversible and non-reversible assets will only be known by the end of the first half.

Mr. Borges says that the list of assets include non-reversible items in excess that the company may sell in the future, thus reducing operating costs. “But this is not the goal of integrating inventories,” he says. The goal, he says, is guaranteeing better control and quality in asset management.

In the fourth quarter of 2012, Oi sold properties and cellphone towers, which meant an EBITDA gain of R$200 million. At the time, CFO Alex Zornig said the company was evaluating the sale of some assets in the future and sharing infrastructure of fiber-optics and of 4G wireless services as options to keep the debt level under control. Last week, the company got Anatel approval to share 4G infrastructure with TIM.

The inventory may also serve as a map of the company’s structure to evaluate future infrastructure expansion projects. Mr. Borges says that, after concluding the unification of inventories, Oi will be able to conduct other processes of operating integration, including the implementation of a new model for managing fixed assets.

To undertake this process, the teams of Oi and the consultancies visited 5,561 municipalities in all Brazilian states. Of the total assets the company owns, approximately 70% were verified with physical visits. The other items, formed by assets hard to verify in person, such as undersea or underground cables, were included in the inventory based on existing accounting documentation.

(Cibelle Bouças | Valor Economico)