Oi shares suspended in setback to Portugal Telecom tie-up

Thu Mar 27, 2014 7:36pm EDT
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By Luciana Bruno and Leonardo Goy

RIO DE JANEIRO/BRASILIA (Reuters) - Brazil's securities watchdog on Thursday suspended the offer of shares in telecommunications company Grupo Oi SA (OIBR4.SA: Quote) for up to 30 days, dealing a setback to its planned merger with Portugal Telecom SGPS.SA.

The Securities and Exchanges Commission decision came after Oi's chief executive officer, Zeinal Bava, breached a mandatory quiet period ahead of the offer by making comment to the press.

The public offer of Oi shares is a key operation for the success of the merger of the two telecom companies.

Oi said in a statement that it would clarify the situation as soon as possible before the commission to try to resolve any irregularity so that the share offer could go ahead.

The planned combination of Oi and Portugal Telecom had taken an important step forward earlier on Thursday when shareholders of the Brazilian carrier approved a capital increase that will facilitate the merger.

Oi shareholders approved an increase of up to 14 billion reais ($6.1 billion) at a meeting in Rio de Janeiro. While analysts expected minority shareholders to challenge the plan, the vote to pass both the proposal and an asset appraisal of Portugal Telecom took only eight minutes.

Hours later, councilors at telecommunications industry watchdog Anatel gave the go-ahead for the merger, tying it up to the nonexistence of tax debts by both companies and their controlling groups. Antitrust watchdog Cade had approved the deal in January.

Both decisions help inject hope among Oi's controlling shareholders and Brazil's government that the combination will give the combined company more clout to compete inside Brazil with bigger rivals such as Spain's Telefonica SA (TEF.MC: Quote), Telecom Italia SpA's TIM Participações SA (TIMP3.SA: Quote) and Mexico's America Movil SAB (AMXL.MX: Quote).   Continued...