Oi SA rose the most in four years as the company’s appointment of Zeinal Bava as chief executive officer signaled that Portugal Telecom SGPS SA is taking a more direct leadership interest in the Brazilian carrier.
Non-voting shares of Oi rose 17 percent to 4.80 reais at the close of trading in Sao Paulo, the biggest advance since October 2008. Trading volume was 4.5 times the three-month daily average. The Ibovespa benchmark stock index added 0.1 percent.
Bava, who has been with Portugal Telecom since 1999 and has headed all of its main units, is replacing Jose Mauro da Cunha at Oi to lead the company’s restructuring after profit declined in two straight years. Cunha took over temporarily as CEO in January, replacing Francisco Valim, who occupied the position for a year and four months.
“This executive has a record of success, and investors now consider that Oi’s turnaround process in order to increase profitability will be driven by a very competent manager,” Felipe Rocha, an analyst at brokerage Omar Camargo, said by phone from Curitiba, Brazil. “It was known in the market that Cunha was temporarily in that position while the shareholders were looking for the right person to take over.”
Oi has pledged to sell some assets to raise cash and is investing to improve network quality. The Rio de Janeiro-based company is currently the fourth-biggest mobile service carrier in Brazil, with a 19 percent share of the market.
Portugal Telecom owns 12.1 percent of TmarPart, the investor group that controls Oi, and 19.4 percent of the Brazilian carrier’s non-voting shares, according to Oi’s annual report.
“I believe Bava, with his recognized competence and experience, will give a new impetus to the company,” Ricardo Salgado, CEO at the Portuguese bank Banco Espirito Santo SA, Portugal Telecom’s biggest shareholder, said in an e-mailed statement. Portugal Telecom’s shares rallied 7 percent to 3.365 euros in Lisbon.
“The appointment of Mr. Bava is more than just a personnel change and signals a larger change in the execution at Oi,” analysts at Sanford C. Bernstein Ltd. including Robin Bienenstock wrote in a note to clients. “We expect Mr Bava to focus more on reducing the balance sheet with asset sales including submarine cables and to increase wireless network investment, roll out a better integrated product including TV and to be much more productive and innovative than previous teams at finding cost savings.”
Oi’s adjusted net income fell 17 percent to 837.5 million reais ($390.5 million) in 2012 in a second annual decline, according to data compiled by Bloomberg.
Shares have lost 41 percent this year, while the benchmark Ibovespa has declined 11 percent.