In a meeting in Brasilia, councilors at the regulatory agency said Oi and Portugal Telecom need to prove the inexistence of tax debts at all levels of government before carrying out their planned merger.

Earlier in the day, shareholders of Rio de Janeiro-based Oi approved a capital increase of up to 14 billion reais ($6.1 billion) and an asset appraisal of Portugal Telecom, further paving the way for their combination.

($1 = 2.27 Brazilian reais)

(Reporting by Leonardo Goy; Writing by Guillermo Parra-Bernal; Editing by Steve Orlofsky)