Item: The Oi-Telemar bankruptcy in depth from Google News in English, with little follow-up since the announcement last month.
Breaking Brazilian news in re:
the largest bankruptcy in Brazilian history involves a court ruling on prior permission from Brazilian federal communications agency Anatel to transfer shares of the company.
The Rio de Janeiro federal judge fund ruled that Oi and Telemar are public utilities and therefore subject to agency oversight. Industry lobby not happy.
CartaCapital magazine weighs in with an I told you so on the deal that has still-birthed the long sought-after Brazilian super-telecom.
Luis Nassif, meanwhile — «The challenge of reappropriating Oi-Telemar» — calls for federal intervention in the company, recalling the scandalous goings on during the merger period.
I translate, more or less too rapidly …
It will be up to a vulnerable federal interim government, business-friendly and subject to all sorts of pressure, to bring off the deal of the decade: an intervention in the telecom company Oi-Telemar.
And it will not be able to refuse this bitter cup, either. Nearly 2,500 municipalities depend on Oi-Telemar for cellular as well as fixed-line service. Its interconnection services are of crucial importance to cell phone traffic, making the deal a matter of national security.
The General Telecommunications Law provides for such an intervention, but as it stands now Oi-Telemar has fallen into the hands of vulture funds and shareholders specializing in blackmail. These investors buy shares in distressed companies, and particularly those in hock to the banking system, creating difficulties for any sort of negotiated settlement in order to bid up the value of their holdings. In the end, they profit not from an increase in the value of their shares but from pure blackmail.
We are coming to the end of greatest swindle ever perpetrated on a Brazilian public utility, thanks to two successive governments: Cardoso and Lula.
Cardoso sheltered Daniel Dantas during the period of privatization. He allowed part of Teles to be auctioned off to investors who were unwilling to invest their own capital or assume risks.
Groups such as Opportunity, the Lehman-era GP, Andrade Gutierrez, the Jereissatti group, and Inepar assumed control of Teles and began solving their own financial problems using its cash.
During the Cardoso government, Dantas assumed control of Brasil Telecom with less than 1% of its shares.
Taking advantage of the Nasdaq boom, they paid exorbitant prices to acquire Internet firms for the company, such as iG and HpG. The terms of the acquisition of data centers and fiber optics companies were equally scandalous. One by one, these groups made a fortune from the company. During the Lula years, Opportunity cleared as much as R$ 7 billion — the most expensive hush money in history. After Opportunity, all of the remaining groups launched gambits of their own at the company’s expense.
During the Dilma government, communications minister Paulo Bernardo transformed a fine of nearly R$ 2.5 billion into a demand for new investments, which were to be made in addition to paying the fine.
The final venture involved the Portuguese group Ongoing and Portugal Telecom. These launched a poorly explained merger, pitching the notion that the deal would launch a super telecom that would conquer markets in Latin America and Africa. It was the final blow to Oi-Telemar: the acquisition of US$700 million in bonds of the Portuguese Grupo Espirito Santo, which was already bankrupt.
Read back coverage from the Lusophone Sousaphone here.
Filed under: Brazil