Portugal Telecom and Brazil's Oi to Merge

Portugal Telecom and its Brazilian affiliate Oi said they would combine operations to form a new Brazil-based company with more than 100 million subscribers as global telecom companies scramble to gain market share.

The deal is the latest in a wave of consolidations. It is the second major Latin America-Europe telecom deal announced this year, after America Movil, of Mexican billionaire Carlos Slim, launched a takeover of Dutch telecommunications firm Royal KPN in a deal that could be worth €7.2 billion ($9.7 billion). The merger comes at a difficult moment for both Oi and PT. The Brazilian firm is weighed down with enormous debts but must continue to invest to remain competitive. PT, meanwhile, has a small and struggling market at home. Portugal's economy has been in a recession as a result of government cutbacks implemented in the wake of the European sovereign-debt crisis.