SAO PAULO (Reuters) - An activist minority shareholder in Oi SA urged the Brazilian phone carrier's board to revamp a bankruptcy protection plan presented last month, in a bid to neutralize growing pressure from large creditors like bondholders and banks.


In a letter sent to Chairman José Mauro Carneiro da Cunha dated Oct. 14, shareholder Nelson Tanure said Oi's in-court restructuring needed to be designed in a way that favors the survival of the company and not creditors. He urged stricter cost-cutting efforts and a stance toward austerity.


Reuters viewed the letter. A media representative for Tanure declined to comment on the letter.


Oi, which in June filed for Brazil's largest bankruptcy protection plan on 65.4 billion reais ($21 billion) of liabilities, declined to comment.


After dubbing investment firms that bought Oi debt at distressed prices as "vulture funds disguised as proto-New York-based banks," Tanure - who with other investors holds about 7 percent of Oi through an investment vehicle - said repayments should prioritize small creditors. Oi owes money to over 55,000 people and companies.


Tanure's letter underscored the tough road ahead for Oi, whose reorganization program has been hampered by escalating shareholder disputes and protracted negotiations with bondholders since the plan was presented on Sept. 5.

According to a source with knowledge of the matter, the letter was a response to efforts by a group of bondholders that teamed up with Egyptian billionaire Naguib Sawiris to bid for Brazil's No. 1 fixed-line phone operator. The Moelis & Co-led group joined forces with Sawiris "to discuss and evaluate an alternative recovery plan for Oi" during and after it emerges from bankruptcy.

By seeking to favor smaller creditors at the expense of the largest ones, Tanure might be drumming up government support for a revamping of the Sept. 5 proposal, the source added. Government officials have warned that they are ready to intervene in Oi if needed to ensure continuity of service.

In the letter, Tanure questioned the size of fines imposed by telecommunications industry watchdog Anatel, urging that they be negotiated.

Bondholders frowned at the company's original plan because it implied a 70 percent reduction on their debt holdings. With 34 billion reais of securities outstanding, bondholders form Oi's largest creditor group.

Oi, the byproduct of a government-sponsored merger at the end of the last decade, succumbed to a heavy debt burden, mounting competition and years of internal disputes. After the bondholders, state entities, including banks and industry regulator Anatel, make up the largest Oi creditor group with about 20 billion reais of debt.

(Reporting by Guillermo Parra-Bernal and Tatiana Bautzer; additional reporting by Ana Mano in São Paulo; editing by Jonathan Oatis)