CEO of Oi, linchpin of Portugal Telecom deal, faces tougher tests
By Brad Haynes and Guillermo Parra-Bernal
SAO PAULO, July 25 (Reuters) - For Brazil's struggling Grupo Oi SA, it seems the only stock rising these days is that of its Chief Executive Officer Zeinal Bava.
When an 897 million euro ($1.21 billion) default threatened to scuttle Oi's merger with Portugal Telecom SGPS SA, Bava played a key role in talks that saved the deal. A new accord shielded Oi from potential losses and forced Portugal Telecom, his former employer, to bear their brunt.
Bava, who left the top job at Portugal Telecom when he took the reins at Oi last year, soothed the nerves of Oi's Brazilian shareholders while coaxing the Portuguese into reducing their stake in the combined company known as CorpCo, according to two sources with knowledge of the negotiations.
"He was determined not to let this deal founder," said one source, who asked not to be named because the talks were private.
Both sources said the resolution strengthened Bava's hand. But his company's position is as delicate as ever, with debt ratings sliding into junk territory and a costly auction of fourth-generation (4G) broadcast spectrum around the corner.
Just a few months ago, rumors swirled that a freshly capitalized Oi with Bava in charge would lead the consolidation of Brazil's stagnant four-way mobile market. Now regulators warn that CorpCo, the combined company, is at the greatest risk of being gobbled up by rivals.
"You can't deny that entering the auction will be a challenge for Oi. It's going to have a harder time raising cash," Carlos Baigorri, the superintendent of competition at industry regulator Anatel, told Reuters this week.
Skipping the auction would make CorpCo a niche 4G player, exposing it to takeover attempts by rivals, Baigorri added. Continuación...