Oi Telecom’s ambitious path to recovery

Once dubbed a “national champion” in the field of telecommunications, Oi Telecom has become a cautionary tale on the perils of mismanagement and crony capitalism. Thanks to close ties with politicians during the Workers’ Party era, Oi received billions to expand beyond its means, in a strategy that ended up biting it on its rear end in 2016—when the company filed for court-supervised recovery. At the time, it was the largest filing of its kind, with Oi unable to pay debts amounting to BRL 65 billion (the figure would be topped this year by another scandal-riddled company, Odebrecht).

Three years after its darkest chapter—during which the company went through a rotating door of  CEOs—Oi has survived the harsh recovery process; though not without having to deal with disgruntled shareholders and creditors. It now hopes to convince investors that it is ready to turn a new leaf. But will investors ever trust the company again?

Judging by shares performance, it is hard to say. The initial optimism following the company’s release of a new business plan pushed stock prices up in the early hours of July 16. But investors quickly reserved the trend—and Oi stocks have lost 9.8 percent in just two days. Analysts at BTG Pactual and Levante Investimentos say that’s because the plan is as ambitious as it is hard to accomplish—requiring an ability to deliver results close to perfection.

Oi’s new strategy is focused on increasing its already large leadership position in Brazil’s fiber internet market, and becoming a 5G supplier for other carriers. For that, it intends to reach 16 million homes with access to fiber-to-the-home (FTTH) technology by the end of 2021 (versus...