Portugal Telecom CEO says Oi merger on track

Portugal Telecom said its planned merger with Brazil's Oi will be completed in the second quarter and it does not expect any major obstacles from minority shareholders or regulators, according to CEO Henrique Granadeiro.

Reuters reported that despite an initial objection by Brazilian securities regulator CVM, which has blocked Oi's controlling ownership group from participating in calculating the price of some assets involved in the transaction, Granadeiro expected the CVM board to give the go-ahead.

Bloomberg previously reported that Oi and Portugal Telecom had planned to use asset prices approved by their biggest investors to help determine the distribution of shares in the new company. Non-controlling investors had baulked at the dilution of their stock and have been pushing for more favourable terms.

"The board of the CVM still needs to provide a formal opinion on the matter and we are hopeful that they will concur with our views...We remain confident that we will secure the approvals necessary to complete the transaction," Granadeiro told Reuters.

It was announced in October last year that Portugal Telecom will merge with its Brazilian affiliate Oi to create a new company based in Brazil.

As part of the merger, Oi will raise at least €2.3 billion ($3.1 billion) in fresh capital. The current CEO of Oi, Zeinal Bava, will head up the new company, which is expected to be 38 per cent-owned by Portugal Telecom shareholders.

The combined operator would have roughly 100 million customers, and almost $19 billion in annual sales. According to Seeking Alpha the merger would benefit two operators with great potential but with relevant debt problems, which are joining forces in a bid to achieve successful growth.

Seeking Alpha also noted that the new entity would have significantly greater ability to raise further equity, enabling it to participate in any moves to consolidate Brazil's wireless market, such as the potential splitting up and sale of Telecom Italia's Tim Brasil.

Meanwhile in separate reports, Telecom Italia denied media speculation that it was in talks to merge Tim Brasil with Vivendi's Brazilian subsidiary GVT, according to Reuters.

For more:
- see this Reuters article
- see this Seeking Alpha article
- see this separate Reuters article
- see this Bloomberg article

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