Oi SA minority shareholders complain as their shares are ‘diluted’ to fund debt purchase

10 Oct 2013

Minority investors of Brazilian owned telecoms group Oi SA have reportedly criticised the firm’s plan to merge with Portugal Telecom (PT), arguing that their shares have been ‘diluted’ to help fund the purchase of USD2 billion worth of debt from Oi SA’s controlling families. Bloomberg writes that the Jereissati and Andrade-Gutierrez families, both shareholders of Oi SA, are looking to refinance their debt through the sale of convertible bonds to PT which will ultimately become part of the Oi SA group. Concurrently, Oi SA itself is raising up to USD3.2 billion through the sale of new shares – further diluting its stock.

Earlier this month TeleGeography’s CommsUpdate reported that Oi SA had agreed terms to merge with PT in a move that will create a new trans-Atlantic player with around 100 million subscribers, and help it compete more effectively against rivals Telefonica and America Movil (AM). Under the plan being hammered out, shareholders of Oi SA, formed through the restructuring of Telemar Participacoes’ former operating divisions Brasil Telecom, Tele Norte Leste Participacoes, Coari Participacoes and Telemar Norte Leste, will take a majority stake in the new, enlarged entity. The two groups hope that by combining their businesses they will be better positioned to take advantage of nascent growth in Latin America, and counteract stagnation in PT’s home market of Portugal. The tie-up will also result in cost saving and additional revenue of EUR1.8 billion, aiding the group as it fights off Telefonica (Vivo), Telecom Italia’s TIM Participacoes (TIM Brasil) and AM’s Telecom Americas Claro unit in Brazil – the world’s fifth largest wireless market.

Brazil, Oi, Pharol (formerly Portugal Telecom SGPS [PT SGPS])