TNL (Oi) reports falling Q4 profits on restructuring costs

2 Apr 2012

Brazilian telecoms group Telemar Norte Leste (Oi) has reportedly an 80% decline in net income for the fourth quarter of 2011, impacted by increased costs related to its ongoing restructuring. Rio de Janeiro-based Oi said net profit reached BRL140.7 million (USD77.1 million) for the period under review, compared to BRL704.8 million in 4Q10, as costs climbed to BRL475.6 million from BRL310.7 million a year earlier. Industry watchers are predicting a difficult year ahead for Oi, which is reorganising itself to create a more simplified corporate structure. An analyst at Banco Itau BBA is quoted as saying that ‘the group’s investment story is about to go through a major change … We expect 2012 to be a challenging year for Oi.’

In February this year TeleGeography’s CommsUpdate reported that shareholders of Brazilian telecoms group Telemar Participacoes, which markets Oi-branded services in the country through Brasil Telecom, Tele Norte Leste Participacoes and Telemar Norte Leste, have agreed a plan to simplify the firm’s organisational structure, allowing its management to resume networks investments and set up a new dividend policy. In August last year the operating units’ respective boards approved a merger plan to create a single entity that will be Brazil’s second largest fixed and mobile operator by revenue. Under the plan, Brasil Telecom, Tele Norte Leste Participacoes and Telemar Norte Leste will be merged into a single company that will trade under the name Oi SA. Shareholders of the three firms submitted their votes in separate meetings in February in a fourth attempt to alter the structure of the group. Minority shareholders had vetoed the three previous proposals. It is understood that Brazil’s securities regulator, CVM, this time rejected all ten complaints registered by minority investors and allowed controlling shareholders to vote.

Following the restructuring, the three telcos, which between them count seven different classes of shares, will be replaced by Oi, which will have two types of shares traded on the BM&FBovespa SA exchange in Sao Paulo and the New York Stock Exchange. The new enlarged Oi will announce its new investment plan and its new dividend policy on 17 April, chief executive officer Francisco Valim said in a conference call with journalists. Oi’s board hopes the restructuring will realise BRL100 million (USD58.6 million) of savings per annum.

Brazil, Oi