The proposed merger between Brazilian operator Oi and Portugal Telecom was approved by Brazilian competition regulator Cade, with no restrictions placed on the deal.
The merger between the companies was announced in October and is aimed at creating the leading operator in Portuguese-speaking markets. The combined company would be incorporated in Brazil with more than 100 million subscribers.
Cade’s decision was published in Brazil’s official gazette.
The approval will be welcomed by Oi and Portugal Telecom after the merger suffered a setback when a minority of shareholders won the right to fight for more favourable terms.
The Brazilian securities regulator CVM reportedly 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 had planned to use asset prices approved by their biggest investors to determine how shares would be distributed in the new entity.
If the CVM decision is upheld, Oi will need to improve the deal for non-controlling investors who are concerned about their stock being diluted.
Oi hopes the merger will help it to compete more effectively with its larger Brazilian rivals. Although the merger aims to increase efficiency, the operator also needs to invest in its network to lure more lucrative customers away from the other Brazilian players.
The fourth largest operator in Brazil, Oi had an estimated 51.1 million connections at the end of the fourth quarter of 2013, according to GSMA Intelligence figures. Market leader Vivo, owned by Telefonica, had 77.8 million connections while Telecom Italia-owned TIM was on 74.2 million connections, with America Movil’s Claro following with 68.7 million.
Portugal Telecom is already the largest shareholder in Oi and the merger would be the culmination of an alliance announced in 2010.