M&A - Europe

Brazil govt working on Oi-PT partnership-report

* Brazil govt supporting Oi, Portugal Telecom deal

* Companies would run national broadband Internet program

SAO PAULO, July 27 (Reuters) - Brazil's government, one of the main shareholders in phone company Oi TNLP4.SA, is working on a deal to make Oi and Portugal Telecom PTC.LS partners to manage a national high-speed Internet network, Folha de S.Paulo newspaper reported on Tuesday, citing no sources for the information.

Under the proposal, Portugal Telecom would take a minority stake in Oi, with control of the company remaining in domestic hands, the daily said. Oi, in turn, would take a minority stake in Portugal Telecom ventures in Europe and later in Africa, Folha said.

After the partnership between the companies is sealed, Brazil’s government would like to have Oi and Portugal Telecom run the national high-speed Internet program, a $6 billion project to bring broadband access to low-income households, the daily said.

A spokeswoman for Oi in Rio de Janeiro said the company would not comment on the report. Calls to officials at the Brazilian government weren’t immediately answered.

Oi is the product of a government-sponsored merger of two rival Brazilian phone companies early last year to create a Brazilian telecommunications company able to compete with foreign rivals.

Oi is controlled by a group formed by Brazil’s state development bank, pension funds and local business groups.

The government is the largest individual investor in the phone company, with a 31.4 percent stake in the holding company that controls Oi. State pension funds Previ, Funcef and Petros also hold a combined 18.5 percent in Telemar Participacoes, the holding company. (Reporting by Elzio Barreto and Natuza Nery, editing by Dave Zimmerman)