Portugal Telecom will merge with its Brazilian affiliate Oi to create a new company based in Brazil under the name of CorpCo, the Portuguese operator said on Wednesday.
As part of the merger, Oi will raise at least €2.3 billion ($3.1 billion) in fresh capital. The current CEO of PT Portugal and Oi, Zeinal Bava, will also head up the new company, which is expected to be 38 per cent-owned by Portugal Telecom shareholders. The transaction is expected to close in the first half of 2014.
"The combination of PT and Oi will create a leading telecoms operator with operations covering a population of about 260 million people and 100 million subscribers," Portugal Telecom said in its statement.
The operator also said that CorpCo will benefit from its enhanced scale in both Portugal and Brazil, while the merger is also expected to generate cost savings and additional revenue valued at about €1.8 billion.
The two operators had 2012 combined revenue of €12.4 billion and earnings before interest, taxes, depreciation and amortisation of €4.2 billion. In Portugal, PT sells a wide range of fixed, mobile and multimedia services to consumer and business customers.
"The merger is a natural fulfillment of the industrial alliance established in 2010 creating a leading telecoms operator led by Zeinal Bava as CEO," Portugal Telecom added.
As things stand, a memorandum of understanding has been signed with the full backing of PT's two largest shareholders, Avistar and Nivalis Holding. The merger is now conditional on approvals by the shareholders of Oi and PT, the successful completion of the capital increase, the successful completion of the liability management of the PT and Telemar Participações (Tpart) debt, as well as approvals by relevant regulatory authorities.
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