The merger of Brazil’s fourth-largest operator Oi and Portugal Telecom suffered a setback after minority shareholders won the right to fight for more favourable terms, reports Bloomberg.

Brazilian securities regulator CVM made a preliminary decision that Oi’s controlling owners cannot participate in calculating the price of some assets involved in the transaction.

The two companies planned to use asset prices approved by their biggest investors to determine how shares would be distributed in the new entity.

The merger between the companies was announced in October in a bid to create the leading operator in Portuguese-speaking markets. The combined company would be incorporated in Brazil with more than 100 million subscribers.

Portugal Telecom is already the largest shareholder in Oi and the merger would be the culmination of an alliance announced in 2010.

Regarding the CVM decision, Raphael Martins, a lawyer representing Oi investor Tempo Capital, told Bloomberg: “This is a fundamental step in the merger, and they’re going to have to convince minority shareholders of the advantages of the operation, or it won’t happen.”

It the CVM decision is upheld, Oi CEO Zeinal Bava (pictured) will need to improve the deal for non-controlling investors who are concerned about their stock being diluted.

Bava is keen for the merger to happen in order for the operator to compete more effectively with larger Brazilian rivals Claro (America Movil), Vivo (Telefonica) and TIM (Telecom Italia).

However, Oi will also need to upgrade its network to compete more effectively for more lucrative customers with the other players in Brazil.