Oi boy

“OI” IS a cheerful, informal greeting in Brazilian Portuguese. But after the telecoms operator of the same name made the largest bankruptcy-protection filing in Brazilian history on June 20th, the country may finally be saying goodbye to its hopes of creating a strong, state-backed national champion. Brazil’s interim government says it will not bail out the company, which is in debt to the tune of 65 billion reais ($19 billion). State-controlled banks have not been prepared to forgive what the firm owes to them. Parts of the company could be sold off to foreign buyers.

Oi was once treated more favourably by the government. The product of a state-sponsored merger eight years ago aimed at building a homegrown giant in a market dominated by foreign firms, Oi was even regarded as a potential global player. It is the country’s largest fixed-line firm, but has struggled to compete with international rivals in the much more lucrative mobile market, where it is Brazil’s fourth-largest operator, despite lots of official funding and regulatory changes in its favour.

Like many firms in the country, Oi piled on debt during the boom years. It has subsequently been caught out as the economy has floundered because of the misguided interventionism of Dilma Rousseff, who had to step aside from the presidency in May after Brazil’s Senate voted to hold an impeachment trial against her, compounded by the falling prices of commodities.

Mismanagement has not helped Oi. As the company has struggled to digest a merger with Portugal Telecom, it has chewed through six chief executives in five years. Now its three larger mobile competitors—Spain’s Telefónica; América Móvil, belonging to Carlos Slim, a Mexican billionaire; and TIM Participações—are poised to make gains at Oi’s expense, as the firm goes through Brazil’s complicated bankruptcy process.

The firm’s predicament is the latest shock to hit the country’s battered economy. The interim president, Michel Temer, has a more pro-business outlook than Ms Rousseff. Privatisations are seriously being considered for the first time this century. But time is running out for a string of heavily indebted Brazilian companies, from steelmakers to construction firms. The question is whether they can restructure their debts and avoid the fate of Oi. If they fail several big firms will be saying “tchau” instead.