Portugal Telecom is a limited liability holding company, organized as a Sociedade Gestora de Participações Sociais under the laws of the Portuguese Republic. All of the directors and executive officers of Portugal Telecom and some of the experts named in this information statement reside in Portugal or elsewhere outside the United States. The vast majority of Portugal Telecom’s assets are located outside the United States and all or a substantial portion of the assets of these other persons may be located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon Portugal Telecom or such other persons with respect to matters arising under the Securities Act or to enforce against them judgments of courts of the United States predicated upon the civil liability provisions of the Securities Act.
Therefore, you may need to enforce U.S. courts’ judgments in the Portuguese courts. In such an event, Portuguese law subjects the enforceability of foreign sentences to a High Court revision procedure, which is merely formal and aims exclusively to ensure respect for due process of law. Based on the opinion of Garrigues Portugal— Sucursal SL, our Portuguese counsel, there is doubt as to the enforceability in Portugal, whether in original actions or in actions for enforcement of judgments of U.S. courts, of liabilities predicated solely upon the U.S. federal securities laws.
Regulatory Approvals for the Business Combination
The Capital Increase, the merger of shares and the merger are conditioned upon the regulatory approvals described below and in “The Shareholder Meeting and the Business Combination.” Neither the merger of shares nor the merger is conditioned upon the approval of the CVM or the BM&FBOVESPA.
Under Portuguese law, the merger agreement relating to the merger of Portugal Telecom with TmarPart must include information that the CMVM considers to be equivalent to that of a public offer and admission to trading prospectus, which we refer to as the “Portuguese prospectus.” The information to be included in the
Portuguese prospectus is described in the Portuguese Securities Code, Portuguese Securities Commission Regulation No. 3/2006 and Regulation No. 809/2004/EC of the Commission of April 29, as amended. The Portuguese
prospectus will be subject to review and comment by the CMVM, but will not be formally approved by the CMVM. Each of the merger of shares and the merger is conditioned on the applicable SEC registration statement having been declared effective by the SEC. The approval by the NYSE of the listing of the TmarPart ADSs to be delivered in connection with the merger of shares and the merger must be obtained for these ADSs to be traded by their holders. The admission to trading of the TmarPart common shares to be delivered in connection with the merger of shares and the merger by the NYSE Euronext Lisbon and the delisting of the Portugal Telecom ordinary shares must be obtained for the TmarPart common shares to be traded by their holders on the regulated market of the NYSE Euronext Lisbon.
We are unable to predict whether it may be necessary to delay the completion of the Business Combination pending the outcome of any approval or other action. We cannot assure you that any approval or other action, if needed, would be obtained or would be obtained without substantial conditions. In addition, we cannot assure you that if the approvals were not obtained or other actions were not taken, adverse consequences might not result to our business or the businesses of our subsidiaries.
ANATEL Review
Under Brazilian regulations, the merger must be submitted to ANATEL to assess its effects on the Brazilian telecommunications services market and to confirm whether the applicable requirements will be met. TmarPart must obtain the approval of ANATEL prior to the effectiveness of the merger. TmarPart has submitted the merger to ANATEL. If ANATEL takes any action to impose conditions or performance commitments on us as a part of the approval process for the merger, including conditions that would require TmarPart to undertake significant capital expenditures or would require Oi to divest any significant part of its assets, that action could
materially and adversely affect TmarPart’s business, financial condition and results of operations and prevent TmarPart from achieving the anticipated benefits of the Business Combination.
Brazilian Antitrust Review
Under Brazilian antitrust regulations, the merger of shares and the merger were subject to review by CADE to assess the effects on competition of the merger of shares and the merger. Brazilian law does not permit us to consummate the merger of shares or the merger prior to receiving the final approval from CADE, and the parties must keep their current competitive status until final approval is granted. TmarPart submitted the merger of shares and the merger to CADE for approval on December 12, 2013, and CADE granted its unconditional final approval to the merger of shares and the merger on January 14, 2014.
Portuguese Antitrust Review
The merger is subject to clearance by the Portuguese Competition Authority, and may only be completed after such clearance is obtained following a non-opposition decision (express or tacit). Portugal Telecom submitted a draft notification to the Portuguese Competition Authority on January 20, 2014. Subsequently, the Portuguese Competition Authority may request additional information prior to making a formal filing. The Portuguese
Competition Authority may prohibit the merger if it determines that the merger is capable of significantly impeding effective competition in the Portuguese market.
In connection with the Portuguese antitrust review, the Portuguese Competition Authority may ask ANACOM to issue a non-binding opinion on the possible impact of the merger on the Portuguese electronic communications markets in which Portugal Telecom operates. In response to this request, ANACOM may suggest remedies to be adopted by the Portuguese Competition Authority to address effects that ANACOM considers may adversely affect consumers or competition in the Portuguese electronic communications markets.
Additionally, as Portugal Telecom is an active participant in the Portuguese television distribution market, the Portuguese Competition Authority may request an opinion from the Portuguese Media Regulation Authority (Entidade Reguladora para a Comunicação Social), or “ERC,” in connection with the Portuguese antitrust review.
There is no assurance that the Portuguese Competition Authority will not prohibit the merger or will not impose additional conditions to the approval of the merger.