P. Telecom Shareholders Take 10 Days to Consider Altice Deal

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Portugal Telecom SGPS SA shareholders voted for a 10-day suspension of today’s meeting to decide on the sale of Oi’s Portuguese telecommunications assets to billionaire Patrick Drahi’s Altice SA. Oi’s shares fell as much as 15 percent.

Shareholders are scheduled to meet again in Lisbon on Jan. 22 “with the same agenda,” Portugal Telecom said in a regulatory filing today.

The decision comes after Portuguese securities regulator CMVM requested more information from Portugal Telecom in a Dec. 9 statement, asking it to adopt “adequate measures” to safeguard shareholders’ rights and the legality of decisions to be taken at the meeting. The CMVM said today that Portugal Telecom shares would resume trading after being suspended on Friday pending the release of “relevant information” without providing more details.

Oi, Brazil’s smallest wireless carrier, supported the move to suspend the meeting, it said in a statement today. Shareholders including Ongoing Investments SGPS SA proposed the suspension to give more time for information to be made available to investors as requested by the regulator, Rafael Mora, vice chairman at Ongoing, told reporters after the meeting today. The proposal was approved with 90 percent support, he said.

Oi-PT Merger

The Portuguese assets are being sold by Brazil’s Oi SA, which gained them as part of a merger between that company and Portugal Telecom. Portugal Telecom is a minority investor in Oi and has no control over the assets but has the power to block the sale. Oi fell as much as 96 centavos to 5.64 reais, an all-time low, before finishing at 5.70 reais in Sao Paulo.

Oi and Portugal Telecom agreed more than a year ago on their combination. In July, the companies renegotiated the deal to give Portugal Telecom a smaller stake in the combined entity after it emerged that the Portuguese company was holding debt defaulted by Grupo Espirito Santo’s Rioforte Investments SA.

In a report released Jan. 8, PricewaterhouseCoopers criticized Portugal Telecom’s policy regarding the purchase of Grupo Espirito Santo debt. Portugal Telecom’s risk-management model for short-term investment wasn’t “effectively implemented” regarding diversification, PricewaterhouseCoopers said in the report.

Brazil Consolidation

The sale of the Portuguese assets would pave the way for a potential bid by Oi to combine with Telecom Italia SpA’s Tim Participacoes SA unit in Brazil. Chief Executive Officer Bayard Gontijo said on Dec. 15 that Oi would use proceeds from the sale to finance any bid for the wireless carrier. In a statement today, Oi reiterated that the sale was the best option for shareholders.

Tim has been studying a takeover of Rio de Janeiro-based Oi to gain market share and compete with Telefonica Brasil SA and America Movil SAB’s Claro brand in Brazil.

Any delay with the Portuguese sale could potentially deter Telecom Italia from making an offer, people familiar with the matter have said. That’s because Telecom Italia is focused on Brazil and has no any interest in gaining Oi’s assets in Portugal, one of the people said.

“I don’t know at this time of a better alternative than the one on the table,” Ongoing’s Mora said on Dec. 8. “I’m open to any other alternatives that will bring value to the company, but not those that will generate litigation.” Ongoing holds a 10 percent stake in Portugal Telecom, according to the phone company website.