Life became even more complicated for Portugal Telecom on Friday when the country’s stock market regulator suspended trading in its shares and requested more information relating to the proposed sale of its Portuguese operations.
The move came just days before the telco’s shareholders are due to meet to discuss Oi’s planned sale of the Portuguese part of the business to Altice and hours after a PwC study criticised its risk management policy.
Trading in Portugal Telecom’s shares was halted "until material information on the issuer is published," the Portuguese Securities Market Commission, or CMVM, said in a statement.
The regulator said that between 22 December and 6 January it has on a number of occasions attempted to obtain "essential clarification" from Portugal Telecom that will enable shareholders to vote in an informed manner on the proposed deal. It did not specify exactly what information it is looking for.
Portugal Telecom has failed to provide the requested information, but has nonetheless scheduled its shareholder meeting for Monday.
At the meeting, shareholders are due to vote on the sale of the Portuguese assets in a €7.4 billion deal brokered by Oi in December. Portugal Telecom is effectively a shareholder in an enlarged Oi, the pair having agreed to merge more than a year ago. The Portuguese assets belong to the enlarged group.
Portugal Telecom took a smaller stake in the combined entity than originally planned after its controversial investment in Rio Forte Investments debt emerged. It acquired the debt without Oi’s knowledge and when Rioforte defaulted on the repayments the telcos reworked the terms of their merger deal.
Portugal Telecom hired PriceWaterhouseCoopers to carry out a study of the circumstances that surrounded that investment and on Thursday it published the results.
In its conclusion, PwC described Portugal Telecom’s short-term risk management policy as "generic and…not effectively implemented," when it came to diversification and to evaluation of Espírito Santo International’s [ESI’s] credit risks. Rioforte is part of ESI.
On Thursday the CMVM sent an official letter to Portugal Telecom’s board reiterating its request for information "and calling for suitable measures to be implemented in order to fully protect the rights of shareholders and the lawfulness of decisions to be taken," it said.
