Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Oi Cancels $449 Million Dividend After Debt Passes Threshold

July 24 (Bloomberg) -- Oi SA, Brazil’s largest landline phone company, canceled a dividend payment of 1 billion reais ($449 million) after exceeding a self-imposed limit for indebtedness.

The ratio of net debt to earnings, leaving out items such as interest, exceeded 3 at the end of June, Oi said today in a filing. The company plans to report its full second-quarter results on Aug. 13.

Oi, based in Rio de Janeiro, has struggled to keep debt in check after promising investors the highest dividend yield in the global telecommunications industry. It already paid 1 billion reais in dividends in March and had promised 8 billion reais in payouts between 2012 and 2015, as long as its debt stayed below the threshold.

“There’s not a choice but to not pay the dividend,” said Robin Bienenstock, an analyst at Sanford C. Bernstein & Co. in London, in an interview today. “Oi could be worth more if the dividend were reinvested in the business and in reducing the debt.”

Oi jumped 5.2 percent to 4.63 reais at the close of trading in Sao Paulo, reversing a drop of as much as 6.6 percent. The benchmark Ibovespa fell 0.9 percent.

“We view this announcement favorably,” Itau BBA analysts including Susana Salaru wrote in a report today. “Oi has shown discipline in respecting the self-imposed leverage limits established in its dividend policy.”

To contact the reporter on this story: Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.