Brazil's Oi to Issue Telemar Operator Preferred Shares on NYSE

SAO PAULO -(Dow Jones)- Brazilian telecom Oi plans to list preferred shares in operating company Telemar Norte Leste on the New York Stock Exchange following completion of its deal to buy control of local rival Brasil Telecom Participacoes, company officials said Monday.

The company is also looking at listing Telemar common shares, said Oi's director of investor relations, Roberto Terziani.

Currently Oi lists preferred shares in Tele Norte Participacoes, the holding company for Oi and Telemar.

Terziani said Oi doesn't risk reducing the liquidity of its shares with a second issue.

"On the contrary, it will give investors more options," he said during a call with investors.

On Friday, Oi said it will pay 5.9 billion Brazilian reals ($3.5 billion) to acquire a controlling share in Brazil's fifth-largest telecom operator in revenue terms, and spend as much as BRL6.5 billion more on buying back outstanding common shares and a portion of preferred shares.

The Brazilian government has been a major cheerleader for the deal, but its closing still depends on a change in telecommunications law, which has to be approved by industry regulator Anatel. This could take three months or more, said Luis Eduardo Falco, Oi's chief executive, during the call.

He said the company's plan was to expand internationally, focusing on other Portuguese-speaking countries, notably in Africa.

The size of the deal will mean that Oi will have to tap a range of financing sources, including debenture issues, syndicated loans and possible share issues, Falco said.

Shares in Oi and Brasil Telecom continued to plunge Monday, after falling on the deal's announcement Friday.

Oi shares were 7.0% lower at BRL38.60 in early afternoon trading on the Brazilian Stock Exchange, or Bovespa, as investors took profits. The stock had risen sharply in recent weeks in anticipation of the deal.

The stock was also hurt by the high level of debt the company must take on and the dilution of the shares due to the possible Telemar issue in New York.

Meanwhile, Brasil Telecom shares were 3.3% lower at BRL24.17 as investors eyed the company's offer to buy back a third of the shares and the liquidity reduction that move would cause.

-Alastair Stewart, Dow Jones Newswires; 5511-3145-1480; alastair.stewart@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 28th April 2008