Morningstar Rating

Stock Research and Analysis

by Allan C. Nichols, CFA

Bulls Say

Oi's potential merger with Portugal Telecom could generate BRL 5.5 billion in synergies (broken up as 38% in operating expenditures, 22% in capital expenditures, and 40% financial).
Oi is starting to improve its margin base given improvements in retention management, efficiency gains in field force, and better billing utilization.
Oi has the largest fixed-line backbone in Brazil. It also launched a satellite TV service last year and has expanded its subscriber base at a very fast clip. Read more 

Bears Say

Oi has cut its dividend outlook for 2013-2014 by 66% given liquidity concerns and weak first-half earnings.
Nearly 70% of the firm's revenue comes from a wire-line business that is in a secular decline due to fixed-to-mobile substitution.
To facilitate the PT merger, the firm did a massive rights issue that diluted Oi's shares without the benefit of lowering leverage. Read more 

Management

In June 2013, Portugal Telecom''s CEO Zeinal Bava, also became the CEO of Oi. He replaced Jose Mauro Mettrau Carneiro da Cunha, who assumed his former position as chairman of Oi's board. With the fallout from Portugal Telecom's purchase of Rioforte   Read more 

Profile

In Brazil, Oi now has nearly 18 million lines in service, making it the largest fixed-line provider in Brazil. Its wireless operation, Oi Movel, controls more than 50 million   Read more 

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