Portugal Telecom shares slide as $8.7 billion deal postponed

AP News
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Posted: Jan 13, 2015 7:42 AM
Portugal Telecom shares slide as $8.7 billion deal postponed

LISBON, Portugal (AP) — Portugal Telecom shares lost more value Tuesday as new doubts about the company's future — and legal questions about its recent past — eroded market confidence.

A day after the postponement of a shareholder decision on whether to sell the troubled company to France's Altice for 7.4 billion euros ($8.7 billion), the share price dropped 3.5 percent, to 0.69 euros — about the price of an espresso in a Lisbon cafe. In 2010, the year before Portugal needed an international bailout, the average share price was 11 euros.

The disarray at what was once one of the country's biggest and most successful companies has reminded the Portuguese that, even though the three-year bailout program is over, more problems may be lurking.

Last summer's collapse of Banco Espirito Santo, Portugal's biggest listed bank, amid charges of fraud and the pre-Christmas jailing of 2005-2011 Prime Minister Jose Socrates on suspicion of corruption further undermined public faith in corporate culture and political leaders.

On top of that, the country's post-bailout economic health remains frail. There are doubts about whether Portugal managed to cut its budget deficit to 2.7 percent of gross domestic product last year, as promised. Public debt is almost 130 percent of GDP, one of the highest levels in the eurozone.

Trading in Portugal Telecom's shares had been suspended since Friday, because the Lisbon stock exchange said the company had failed to disclose key information.

Portugal Telecom SGPS SA's share price has lost more than 80 percent of its value over the past 12 months, much of it since it loaned almost 900 million euros to an unrelated company — part of the Espirito Santo business empire — that went bankrupt. Authorities launched a fraud investigation after the loan was disclosed.

The difficulties have placed a question mark over Portugal Telecom's planned merger with Brazil's Oi. The proposed deal soured after Oi said it was unaware of the loan, most of which will not be repaid.

Portugal Telecom shareholders are due to vote on the Altice offer Jan. 22.