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Brazil Telecom Company, Oi Gains on Portugal telecom takeover bets

Reports suggest its becoming apparent that Oi, as well known as Tele Norte Leste Participacoes SA, by far the biggest telecoms company in Brazil, is the target of a potential acquisition investment bid by a renowned Portuguese Telecoms firm. Speculation was ripe Monday that the company is being keenly watched for investment acquisition by Portugal Telecom SGPS SA, the Lisbon based telecoms company, as it seeks to maintain a presence in Brazil, Latin America’s biggest economy.

 

Last week, the Portuguese government used its veto power, with regard to its stake in the Portugal telecoms firm, to deny Telefonica SA’s bid for Portugal Telecom’s stake in Vivo Participacoes SA, Brazil’s biggest mobile phone company. Telefonica had made a €7.15 billion offer for the Brazilian firm and was awaiting shareholder approval to seal the deal.

 

However, according to pundits, optimistic investors are hopeful that the European Union will nullify the Portuguese government’s decision thus paving way for the sale of Portugal Telecom’s stake in Vivo to Telefonica and enabling Portugal Telecom to seek additional assets in Brazil. Maria Tereza Azevedo, a pundit working with Link Corretora in Sao Paolo, said investors were betting on the move by the European Union, with widespread speculation that the European Court of Justice will disapprove the Portuguese government’s decision and approve Portugal’s golden share.

 

If the Portuguese firm is allowed to sale its stake in Vivo, analysts expect that its next obvious acquisition move would be to go for Oi. The government’s move to reject Portugal Telecom’s sale of its Vivo stake came amidst a 74% approval from the company’s investors present at its shareholder meeting held in Lisbon on 30th June. Telefonica had offered to buy Portugal’s stake in their 50-50 JV Brasilcel NV, the owner of 60% of Vivo.

 

Portugal Telecom hasn’t studied any concrete merger in the Brazilian market and hasn’t mandated any third party to negotiate a merger or the purchase of a stake in Oi, the Portuguese company said in a regulatory filing yesterday. Oi’s voting shares gained 1.6 percent to 38.10 reais while the benchmark Bovespa index fell 0.9 percent.

 

Tele Norte Leste Participacoes SA (TNL) is a telecommunication service provider in Brazil with a range of integrated telecommunications services that includes fixed-line and mobile telecommunications services, data transmission services and Internet service provider (ISP) services for residential customers, small, medium and large companies, and governmental agencies. TNL operates under the brand name TNL PCS S.A. (Oi).


6 July 2010.