Friday, October 18, 2013

Portugal Telecom Patches in Brazil

Renee Schultes, in her article “Portugal Telecom Patches in Brazil”, writes that Portugal Telecom’s shares rose in value when this company was announced to be merging with Brazilian partner.  The deal was too costly. Oi and Portugal Telecom are already in a merger; and, they are under heavy debt. The merger will benefit Oi’s operations in Brazil. The new merger will have many positive points, like it will give strong bargaining power to the companies. Savings will be high, which will lead to higher profit. This merger will be an important step toward international marketing. There will be no separate entities in the new merger. There will only be one entity and one share class. Portugal Telecom shareholders may have some doubts in this regard. Oi’s earnings dropped because of higher costs and unpaid customer bills. In the new merger, Oi will participate by increasing its capital; while, Portugal Telecom will not raise its capital. Portugal Telecom is also reported to be planning to sell its assets to Oi. Oi’s chief executive, who is an expert in international and domestic business, will lead the new merger company. This will enable Oi to improve its functioning and earnings. Brazillian market is facing a lot of competition because more and more consumers are getting interested in the use of broadband and smart phones.

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