Portugal Telecom has acquired a 25.3 per cent of Brazilian carrier Telemar Norte Leste SA or Oi. The transaction was for a consideration of 8.32 billion reais, about US$5 billion, and gives the Portuguese firm a bigger stake than it had originally planned to acquire. The purchase comes as the finalization of a long standing deal that was announced last year.

Portugal Telecom announced that it has finalized its acquisition of a strategic stake and partnership with Oi. The move follows a capital increase by Oi. Subsequently, as a result of the capital increases undertaken as part of PT’s investment in Oi, the Brazilian firm’s net debt for 2010 was reduced by R$ 6.0 billion to R$ 12.7 billion. According to Portugal Telecom, Oi’s pro-forma net debt to EBITDA now stands at 1.2x, thus enhancing significantly Oi’s financial profile.

The stake was built through direct investments in the company and indirect positions in its biggest shareholders, Portugal Telecom said in a statement. The acquisition includes 25.6 per cent of Telemar Participacoes SA, the group that controls the Brazilian phone carrier.

Portugal Telecom’s investment in Oi will see the firm acquire a 35% stake in AG Telecom Participações S.A.; a 35% stake in LF Tel S.A.; a 12.07% stake in TmarPart; a 10.49% stake in TNL, and a 9.43% stake in TMAR. These combined investments equate to a 25.28% direct and indirect stake in Telemar Norte Leste, of which around two thirds are held directly in listed companies.

Portugal Telecom has also concluded the acquisition of a 16.2% stake in CTX for R$ 116 million. As a result of this purchase, the firm has acquired a direct and indirect stake (via AG and LF) of 42.0% in CTX, which will be proportionally consolidated as from 1 April 2011. Upon completion of both Oi’s and Contax’s transactions, Portugal Telecom will proportionally consolidate 25.6% of Oi and 44.4% of CTX and the total combined investment will stand at R$ 8.2 billion.

Following these transactions, the Portuguese telecoms major expects to benefit from a robust balance sheet and significant financial flexibility, with a cash flow profile consistent with its attractive shareholder remuneration policy and an investment grade rating.

Portugal Telecom is investing in Oi to tap growing demand for mobile-phone and Internet services in Brazil. The Portuguese carrier announced plans in July to buy a stake in Oi after selling its half of Vivo Participacoes SA, Brazil’s largest mobile-phone company.