Aoi was declared bankrupt and then suspended by the courts. Whatever the outcome, this event holds two fundamental lessons about Brazilian capitalism. First: The mistakes of the National Heroes policy that was implemented in the first governments of President Luiz Inácio Lula da Silva. Second: Successful privatization of telephone companies.
In the Telebras auction, the Telemar consortium acquired fixed-line telephone services in the North, Northeast and Southeast, with the exception of São Paulo. It was the largest telecommunications company in terms of regional coverage, and was present in 16 states. From the beginning, the business aroused skepticism among investors. The sale was only made possible because the government itself gave a small boost through equity stakes from state-owned pension funds and BNDES. Telemar was born with the quasi-governmental characteristic that identifies some private companies over which the government still exerts influence.
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In 2007, its name was changed to OY. For the government, it was the embryo of a “supercompany,” one of the national heroes that Lula viewed as engines of growth. In difficulties, he began to exaggerate. In 2008, Planalto changed legislation to allow a merger with Brasil Telecom, responsible for the southern and central-western regions. The rule prohibits franchisees from different regions from combining to stimulate competition. For DLP supporters, this was not a significant detail in the plan to expand state powers over the private sector.
Oi was artificially expanded, with credit backed by BNDES. As it grew, instead of focusing on technological advances that redesigned the world of telecommunications and provided excellent services, far-fetched plans attempted to solve problems through politics. With Planalto’s blessing, Portugal Telecom entered the capital of Ué again, and during Dilma Rousseff’s first administration, the two companies merged. Then, an €897 million vulnerability was discovered in the Portuguese telecommunications company, and the merger collapsed.
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In the face of competitors with more capital, more technical proficiency and better management, Aoi was fading. In 2016, with debts amounting to R$65 billion, it entered its first judicial recovery process. I graduated in 2022, but months later I entered the second. It has remained in the hole ever since. It has survived thanks to 4,664 contracts with public bodies. It is still the only phone in 7,500 locations.
The court annulled the bankruptcy decision at the request of the creditors. Managers remain responsible for ensuring that the services provided are maintained, under the supervision of Anatel. It is necessary not to harm users and the sector. There is a risk that the government will try to renationalize Oi. This would be an unfortunate outcome, a typical consequence of state intervention where taxpayers are asked to bear the losses of others. A reasonable alternative is to sell parts of the company to other telecommunications companies capable of managing the business. Thanks to a strong private communications system, this was possible without passing any bills to the treasury – evidence of the success of telephone privatization.
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