Portugal Telecom (News - Alert) is merging with its subsidiary Oi, operating in Brazil, and will choose a new name while moving the company headquarters to Brazil. Oi owns the assets of former incumbent telco Brasil Telecom (News - Alert).

The new firm will have more than 100 million subscribers.

As part of the merger plan, Oi will raise between €2.3 billion ($3.1 billion) and €2.7 billion ($3.65 billion) in new capital to improve the balance sheet of the new company, PT said.

Portugal Telecom said its shareholders will own about 38 percent of the new company, and expects cost savings of about €1.8 billion with the merger.

"The merger will consolidate the position of both companies as the leading operator for Portuguese-speaking countries with leadership positions in all markets where it operates," PT said.


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After selling half of Brazil's top mobile operator, Vivo, to Spain's Telefónica SA in 2010, PT used about half of the €7.5 billion proceeds to buy a 25 percent stake in Oi, in March 2011.

Telecom Italia (News - Alert) SpA, which owns mobile operator TIM Participações SA and Telefónica Brasil SA, which owns Vivo, have about 56 percent share of the country's 268.44 million mobile-phone subscriptions.

America Movil SAB is the third largest mobile phone company in Brazil with a market share of 25 percent, while Oi SA is the fourth with 18.64 percent.

Oi is Brazil's largest incumbent local exchange carrier, with 13 million fixed network subscribers, as of June 30, 2012. It also provides mobile services to 45.2 million subscribers, 4.8 million fixed network broadband customers and 487,000 video entertainment customers, as of June 30, 2012.

The company reported net revenues of BRL 28.2 billion (about $13.9 billion) in 12 months ending on June 30, 2012.

In the first quarter of 2013, Oi had about 75 million revenue generating units and BRL 28 billion worth of revenue.

The merger is in part, an example of how Europe-based telcos are looking at revenue growth, namely by expanding outside of Europe.