(Bloomberg) -- Brazil's government can't waive Oi SA's debt with a local regulator and state-run banks, the communications minister said, denying the phone carrier a lifeline that would have helped it pull out of the biggest bankruptcy in the country's history.
“The government can't let go of resources, they are public resources, debt with the public administration," Science and Technology Minister Gilberto Kassab said Sunday in an interview in Barcelona, Spain. The debt with the regulator is Oi's main problem with the government, said Kassab, who also oversees communications.
Oi would need a change in legislation to get a reduction in the 20.2 billion reais ($6.5 billion) owed to the government in taxes, fees and fines, Juarez Quadros, head of the telecommunications regulator Anatel, said in January. While creditors and investors are criticizing the size of Oi's tab and pushing the government to agree to a haircut, Oi's bankruptcy judge has ordered Anatel and the carrier to go through mediation to sort out payment.
Kassab has previously signaled that the government could intervene if a solution isn't found among private stakeholders. But on Sunday the minister said he is confident a market solution will be found.
“Work is being done to find a solution,” Kassab said.
Oi, as a so-called “concessionaire” in the country, is required to maintain a vast network of obsolete telecommunications infrastructure across Brazil. This fast-declining part of Oi's business carries with it a high cost -- and fines if service quality falls below acceptable levels.
Oi, created in a megamerger less than a decade ago as one of Brazil's “national champions,” filed for the biggest bankruptcy protection in the history of Brazil last year. The carrier had taken on debt in an attempt to expand market share in the country's growing mobile-phone market, but never managed to rise beyond fourth place.
Separately, Kassab said that the ministry is preparing its position on AT&T Inc.'s acquisition of Time Warner Inc. for when it receives requests from regulators, given that Brazil has a law barring telecommunications operators from producing content. The law is expected to be at the crux of the local antitrust watchdog's review of the deal.
“I don't believe we will have problem approving this deal," Kassab said, adding that it's not his decision to make.
To contact the reporters on this story: Rodrigo Orihuela in Madrid at rorihuela@bloomberg.net, Fabiola Moura in Sao Paulo at fdemoura@bloomberg.net.
To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Crayton Harrison at tharrison5@bloomberg.net, Ville Heiskanen
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