Source: Folha de S.Paulo
After having witnessed the carnage involved in the merger that created Oi, it will be interesting to see if this deal comes off smoothly .
Not only did the Brazilian government support the merger of Oi and Portugal Telecom but it was relieved at the signing of the pact between the two companies.
As the Folha discovered, there were serious concerns about the future of the Brazilian company and debts beyond Oi’s capacity to pay in the midterm.
Before receiving the imprimatur of the federal government, two agreements were negotiated with the federal executive.
The first is the company should raise capital through an IPO (the minimum is R$ 7 billion but the target price is R$ 8 billion) in order to invest more in infrastructure.
The second is the reduction of annual dividends to R$ 500 million — as occurred, in fact, in August, after Oi lost R$ 124 million in the second quarter.
Around two months ago, senior advisors to Dilma met to discuss the merger. At the time, Oi executives asked the national development bank, BNDES, to get involved in the deal, but was immediately turned down by the president.
Internally, there are fears of repeating the errors committed in 2008, during the merger of Oi and Brasil Telecom to create a national “supertelecom.”
The problem was that this transaction, though private, was made possibly chiefly with public funds, including financing by BNDES and state pension funds.
The Oi-BT merger also counted on substantial support from then-president Lula, who authorized a change in the legislation to permit the creation of the supertele. The deal would up causing problems, however.
The federal government expects to see a leaner Oi, a company considered extremely “swollen,” as well as the implementation of a more austere management, as reflected in the reduction of dividends and greater transparency in its decision-making.
In the eyes of the Ministry of Communications, Portugal Telecom is a small company that possesses technology that will drive the growth of the Brazilian partner
Oi occupies fourth place in the mobile telephone market in Brazil and a mission to universalize fixed-line telephony throughtout the coutry.,
The debt load and the fines imposed on the company by Anatel for failures in quality of service have always concerned the federal government, which closely watched the details of th negotiation.
Throughout the process, the principal representatives of the goverment were Zeinal Bava (current CEO of Oi and tapped to command CorpCo) and Otávio Azevedo, chairman of the board of Telemar Participações, the controller of Oi.
As a sign of coordinated action with Brasília, Azevedo took it upon himself to advise communications minister Paulo Bernardo on Tuesday that the Material Event notice would be published early yesterday morning.
Filed under: Brazil |