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(Adds comments by head of watchdog group, adds background on Oi and Anatel)
By Ana Mano
SAO PAULO, Oct 17 (Reuters) - The head of Brazil's telecom watchdog Anatel said on Monday it was not the government's goal to intervene in Oi SA but that it must "be prepared" to do so should the country's largest fixed-line carrier fail to resolve its debt problems during bankruptcy proceedings.
Anatel plans to let Oi's reorganization run its course before deciding on any possible action, Juarez Quadros said in an interview on the sidelines of a telecoms event in Sao Paulo. The proceedings began on June 20.
"The government wants a market solution," he said, adding the company has six months under Brazilian bankruptcy law to complete its reorganization.
In June, Rio de Janeiro-based Oi filed for Brazil's largest-ever bankruptcy to restructure 65.4 billion reais ($20.30 billion) of loans.
If Anatel deems it necessary to intervene, it would be only the second time the agency has done so, Quadros said.
In 2000, Anatel took over the management of local carrier Companhia Riograndense de Telecomunicações (CRT) for six months to resolve a shareholder dispute.
During that period, CRT's parent company, Telefônica , and minority shareholder Brasil Telecom were banned from managing the carrier.
"It was an intervention to make one group of investors leave and to allow another group to take over, after the latter made a winning bid," Quadros said, noting that the process ended when shareholders resolved a financial disagreement. ($1 = 3.2210 reais) (Editing by Daniel Flynn and Matthew Lewis)