Brazil's Oi confirms talks with China Telecom

After setting up a Brazilian subsidiary and meeting authorities in Brasília, state-run telco China Telecom is considering buying shares and injecting money into the bankruptcy-threatened Rio de Janeiro-based carrier Oi in exchange for a stake in the company.

With over 65bn reais (US$20.7bn) in debt and under judicial protection since June of last year, Oi's board proposed an 8bn-real share capital increase in order to improve the state of the telco's balance sheet.

In reply to the Brazilian securities and exchange commission (CVM), which requested clarifications regarding reports that investment fund TPG and China Telecom were negotiating contributing capital to the company, Oi confirmed that "preliminary talks" were underway but said no concrete proposal has yet been presented.

The operator added that it has been holding talks with other potential investors, as well as creditors and stakeholders.

The talks include adjustments to the judicial reorganization plan so that it can be approved as quickly as possible, thus assuring the sustainability of the company's business, Oi said.

Oi has a first general creditors' meeting scheduled for October 9 in Rio de Janeiro. Depending on how the telco's situation plays out, telecom regulator Anatel has already announced it could strip Oi of its operating permits.