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Oi cancels Brasil Telecom stock buy
18 January 2010
Auditors working for Oi have increased their estimates of the potential cost of lawsuits facing Brasil Telecom and so Oi will recalculate the price of a share takeover
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Oi
Brasil Telecom
Brazil
Tele Norte Leste Participacoes
Comment: Oi plans to absorb fixed operator Brasil Telecom and create an integrated service provider. This will cause undoubted delays until the auditors assess the likely risk.
Brazilian operator Tele Norte Leste Participacoes — which uses the brand Oi — has cancelled its plan to buy Brasil Telecom’s shares from minority investors.
Oi suspended its plan to buy shares as part of a $3.32 billion takeover in the wake of mounting estimates of losses from lawsuits. Oi said independent auditors found that losses from lawsuits could be twice the amount the company had provisioned for until now.
The two companies agreed to review the offering’s terms after Brasil Telecom increased provisions for lawsuits by $733 million. The total provisions will reach $1.43 billion, Oi added.
Rio de Janeiro-based Oi will work out a new exchange ratio with Brasil Telecom to take the new provision into account. Oi bought control of Brasilia-based Brasil Telecom a year ago, after announcing the takeover in April 2008. GTB