Oi files for bankruptcy protection after negotiations fail - Mobile World Live

Oi files for bankruptcy protection after negotiations fail

21 JUN 2016

Brazilian operator Oi filed for bankruptcy protection in what was reported to be the biggest case of its type in the country, as it struggles with its debt burden.

The company said the move comes “due to challenges confronted by the company’s management in finding a viable alternative with its creditors”. It said total claims of persons not controlled by Oi totalled BRL65.4 billion ($19.3 billion).

Oi said it has taken the action for a number of reasons, including maintaining its ability to provide services to customers, preserving the value of Oi companies, maintaining continuity of operations and corporate activities, and protecting its cash.

“The company will continue working to secure new customers while maintaining its service and product sales to all market segments, in all of its distribution and customer service channels,” it said.

It was recently reported that the departure of its CEO, Bayard Gontijo, came as the company struggled to meet the demands of both its creditors and its shareholders. A restructure would have seen bondholders taking over almost all of Oi’s stock, with significant dilution for existing shareholders.

Oi has seen its debt grow for multiple reasons, including investments in its fixed line infrastructure – underpinned by regulatory obligations – and through mergers and acquisitions. At the same time, it is struggling with a weak domestic economy, which is limiting customer spending.

The company has also not capitalised on the growth of mobile to the same extent as it rivals, lagging (in connection terms) Vivo (Telefonica), TIM (Telecom Italia) and Claro (America Movil) – which also have some international heft behind them.

The levels of debt repayments are eating into Oi’s cash, meaning its current position is unsustainable for the long term.

Author

Steve Costello

Steve works across all of Mobile World Live’s channels and played a lead role in the launch and ongoing success of our apps and devices services. He has been a journalist...More

Read more

Related

Tags