Home >> More Business news >> This Article

Brazil's Oi Close to Brasil Telecom Takeover Deal

Published on:

Note -- this news article is more than a year old.


SAO PAULO (Dow Jones) Brazil's leading telecommunications firm, Tele Norte Leste Participacoes, or Oi, is close to taking over rival Brasil Telecom Participacoes after controlling shareholders reached an agreement on the key points of the deal.

An accord has been reached, although nothing has been signed, said a spokeswoman for industrial conglomerate Andrade Gutierrez, which is part of the shareholder group that controls Oi.

The expectation is that the deal will be finalized next week, she said.

According to the local Folha de S. Paulo newspaper, the deal could be worth as much as 8 billion Brazilian reals ($4.6 billion).

The controlling groups of the two telecom operators want to create a local telecom operator large enough to compete on a regional basis with Spain's Telefonica and Mexico's America Movil.

The new company would become the main fixed-line phone operator in most areas outside Sao Paulo state. In addition, it would control some 18% of the cell phone market and some 43% of the broadband Internet market.

Oi's controlling group includes the Brazil National Development Bank, or BNDES; Previ, the pension fund for workers at state-owned Banco do Brasil; two local investment groups, GP Investimentos and La Fonte Participacoes; and industrial conglomerate Andrade Gutierrez.

Brasil Telecom is controlled by a number of local pension funds, including Previ, and Citigroup.

The deal is supported by the Brazilian government, but it has still has to change telecommunications rules before the deal can go ahead.

The executive branch has proposed rule changes allowing one company to operate fixed-line services in more than one region and is awaiting approval from telecommunications industry watchdog Anatel.

Earlier Friday, Communications Minister Helio Costa said he had been informally notified of an agreement on joint procedure on various court cases in Brazil and abroad that clears the way for a much-anticipated merger deal.

The main legal battle centered on a disputed umbrella agreement governing control of Brasil Telecom, which was signed by Citigroup, pension funds and Banco Opportunity - the firm's former administrator and operator.

The parties entered into an agreement to end the litigation on Thursday evening, according to a source close to the case.

Share in both companies rose on news that the deal may be closed. Brasil Telecom shares were 5.7% higher at BRL22.45 in afternoon trade in Sao Paulo, while Oi shares were up 5.4% at BRL45.28. The benchmark Ibovespa index was 0.5% lower.

-By Alastair Stewart, Dow Jones Newswires; 55-11-3145-1478; brazil@dowjones.com

(END) Dow Jones Newswires

Sign up for our free email news alerts

Sample Copy


Tags: citigroup  telefonica  compete  brasil telecom  oi  pension  helio  sao paulo  Brazil