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Oi-PT merger given green light by competition watchdog

15 Jan 2014

Brazil’s competition watchdog Cade has ruled that the proposed merger between Portugal Telecom (PT) and its Brazilian cellular subsidiary Oi SA can go ahead as planned, with no restrictions being placed on the deal. The two firms announced last October that PT would be merged into Oi in order to strengthen the Brazilian firm and simplify its ownership structure, while also helping to shore up PT’s operations in its domestic market. The combined entity will have more than 100 million subscribers in Europe and Latin America, with annual revenues of around USD19 billion.

As reported in CommsUpdate earlier this week, Brazilian securities regulator CVM has said that Oi’s controlling ownership group cannot participate in calculating the price of some assets involved in the transaction, meaning that the telco will have to sweeten the deal for smaller investors or risk seeing it derailed altogether. Under the current merger proposals, Oi was hoping to raise at least BRL7 billion (USD2.9 billion) through the sale of new shares, with the proceeds used to pay off debts at Oi’s controlling shareholder Telemar Participacoes. PT was to participate in the capital increase by contributing all of its assets, allowing itself to be absorbed in the new company; the Portuguese firm values itself at between USD2.6 billion-USD2.9 billion. While controlling holders would have their debts paid off through the merger transaction, minority shareholders would see their stakes diluted but receive no payout in compensation. Oi may now have to move to buy out minority shareholders, with financial analysts predicting that this could cost the company as much as BRL950 million.

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

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