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Oi shareholders look to the future

Oi shareholders look to the future

Oi’s largest stakeholders are reportedly no longer aiming to divest their holdings in the beleaguered Brazilian operator and are instead considering how to boost its offering.

According to Reuters, investors have “warmed” to the operator after control over the unit was restored to bondholders – including GoldenTree Asset Management, Solus Alternative Asset Management and York Capital Management Global Advisors - following a three-year legal battle with shareholders.

Oi is Brazil’s largest fixed-line carrier. Having filed for bankruptcy protection in June 2016 with debts of BRL65.4 billion ($19.3 billion), Oi is now on track to raise BRL4 billion (US$1 billion) in capital by the end of this year. This funding will be invested into Oi’s mobile and broadband offerings to complement its strong pay-TV business.

Since 2016, Oi’s shareholders and creditors have debated how to restructure the operator, and during this time it has seen significant declines in its fixed, broadband and mobile businesses. At the end of Q2 this year, Oi’s total subscriber base was down 6% year-on-year to 59 million, while its mobile base had dropped 8.5% to 36.5 million.

However, Oi noted that its residential and B2B offerings had fared better due to “the acceleration of commercial activity, the good performance of the new offerings, both in mobility and in residential segments, and improvement in the quality of the service provided”. It is also increasing its market share in Rio de Janeiro via a pilot project trialling ultra-fast broadband.

The driving factor behind the strategic turnaround is the belief that making Oi a better contender will increase the value of its investors’ stakes over time. However, there are other factors that make a short-term deal unfavourable; in particular, Oi owes around BLR14 billion in regulatory penalties which Brazil’s regulator Anatel argues should be kept separate from the debt restructuring process.

Another challenge comes from one of Oi’s shareholders, Pharol SGPS SA, which is disputing the current course for restructuring Oi’s debt as it believes that the operator will be undervalued by potential buyers until its legal issues are resolved.

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