...Operational Challenges: Fitch Ratings does not foresee any material improvement in Oi S.A.'s (Oi) market position in Brazil, absent an industry restructuring. Oi's market shares in both mobile and fixed segments continued to fall in 2014 due to fierce competition and its inferior service/network qualities, resulting in persistent negative FCF generation amid revenue contraction. Oi's pro forma net leverage is forecast to be 4.8x as of Sept. 30, 2014, which is high for its rating level and compares unfavorably to 4.2x at year-end 2013. Necessary PT Sale: A meaningful recovery in Oi's credit profile hinges on its sale of PT Portugal SGPS, S.A. (PT), which is valued at EUR7.4 billion, to Altice S.A. (Altice), which remains subject to the regulatory approvals in Portugal. This sale is positive, as it provides a necessary war chest for Oi to pursue industry consolidation options and solidify its position within the rating category. The divestiture proceeds, including the planned sale of Africatel...
