SÃO PAULO, Brazil â€" Portugal Telecom and Oi of Brazil on Wednesday announced plans to merge, creating the largest telecommunications company in the Portuguese-speaking world.
The new company will be based in Brazil and listed on the BM&F Bovespa, the New York Stock Exchange, and NYSE Euronext.
PT and Oi together had 37.5 billion reais ($17 billion) in revenue in 2012. Oi is the largest fixed-line and broadband provider and the fourth-largest mobile phone operator in Brazil. The companies said they would have 100 million subscribers combined.
As part of the deal, Oi will issue shares to raise 7 billion to 8 billion reais ($3.2 billion to 3.6 billion) in cash in the first half of 2014. An investor group that includes the Brazilian bank BTG Pactual have already agreed to buy 2 billion reais ($900 million).
Portugal Telecom bought 22.3 percent of Oi in 2010. Since June the two companies have had the same chief executive, Zeinal Bava, who will also lead the new company. Portugal Telecom’s current shareholders will own 38.1 percent of the new company.
Oi shares on the BM&F Bovespa were trading up over 4 percent after the announcement, while Portugal Telecom’s American depositary receipts were up over 10 percent on the New York Stock Exchange.
The merger is not expected to encounter any antitrust problems, because Portugal Telecom sold its stake in another Brazilian telecommunications firm in 2010. But other mergers in Brazil in the industry have drawn attention.
Spain’s Telefónica announced last month that it was increasing its stake in Telecom Italia, which owns the Brazilian cell phone operator TIM, to 66 percent, from 46 percent. But Telefónica already owns the Brazilian operator Vivo, and Brazilian antitrust law prohibits a single company from controlling two cellphone operators.
Brazil’s minister of communications, Paulo Bernardo, had initially said that Telecom Italia would probably have to sell its Brazilian operations. President Dilma Rousseff quickly intervened, saying that Mr. Bernardo had only expressed a personal opinion.
Mr. Bernardo subsequently said that Brazil’s antitrust council would wait to examine the Telefónica-Telecom Italia deal until after it was closed.
Alex Pardallas, telecom analyst with CGD Securities in Rio de Janeiro, said the Portugal Telecom-Oi merger “makes all the sense in the world.â€
“Ever since they had the same C.E.O., all they had to do was agree on the ownership stakes in the new company,†he said.
JPMorgan issued a report Wednesday with a more cautious take on the merger, saying the “massive capital increase should be an overhang to Oi shares†that “outweighed†the positives.
A person with knowledge of the operation said BTG Pactual is also advising Oi on this merger, but BTG, Oi, or Portugal Telecom would confirm the details.
