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The resignation of Zeinal Bava as chief executive officer of Grupo Oi SA on Tuesday has left Brazil's largest fixed-line telephone carrier "weaker and more vulnerable to a takeover," said UBS Securities analysts led by Maria Tereza Azevedo. In a client note on Wednesday, Azevedo said Bava's departure reduced the visibility of any outlook for mergers in Brazil's telecommunications industry. Speculation that Oi could seek to buy pieces of rival TIM Participações SA has mounted in recent weeks. Bava was seen as one of the main supporters of a TIM break-up, the note added. TIM could also be considering a purchase of Oi, according to recent media reports.
"We have argued in the past that Oi itself could become a target for a break-up, with ... TIM buying a large part of its assets. In addition, the TIM break-up scenario is less likely and, at least, significantly delayed," the note said.
TIM shed 1.4 percent to 11.76 reais, while preferred shares of Oi dropped 4.8 percent to 1.58 reais in mid-morning trading in São Paulo.