Vivo and Oi threaten to return fixed telephony concessions to the Union

Operators Oi and Vivo are fighting a legal battle against Anatel (National Telecommunications Agency). The companies threaten to return fixed telephony concessions and leave consumers without service if the Union does not settle a bill that, for telecoms, exceeds R$ 30 billion.

At the center of the discussion are the concession contracts signed shortly after the privatization of telephony, at the end of the 1990s, and which were being renewed with new investment targets.

Also included are the changes made to the contracts at the beginning of the first term of former president Luiz Inácio Lula da Silva (PT), when the government pressured Anatel to hold 15% readjustments in the telephone bill.

The way out was a change in concessions, with fewer obligations and a 2% readjustment, according to Anatel technicians who followed the discussions at that time.

The teles accepted to receive the difference of the changes in the PT era later, but, according to the agency’s advisers, they never entered with the request for the financial rebalancing – which, according to Anatel, is now prescribed.

For the telecoms, all these factors generated an imbalance in the concession contracts in the order of R$ 36 billion.

Anatel, however, dismissed the companies’ complaint and charges about R$ 7 billion for investment goals changed by the agency at the request of the telecoms and which resulted in “a disadvantage for the Union”.

The exchange of goals instrument is possible with the approval of the agency’s board of directors, provided that there is a “meeting of accounts”—which generally takes place once a year.

The discussion about financial rebalancing of contracts is common practice in the regulated environment.

However, with Anatel’s refusal, operators, especially Oi and Vivo —the largest concessionaires in the country—, chose to trigger a clause in the contract providing for arbitration, a process that can be concluded in 2024, one year before the expiration of the contracts. current concession contracts.

Oi and Vivo threaten not to migrate to the new concession contracts if this account is not redone.

According to the General Telecommunications Law, updated in 2019, the contracts provide for the possibility of migrating the fixed telephony concession to a simple authorization term, as was already the case with other services (cellular, internet and pay TV).

In this new regime, the allocation of investments in fixed telephony becomes freer, prioritizing what is of public interest. Instead of allocating a lot of money to payphones, for example, they invest in internet infrastructure.

If operators do not migrate, they will have to return the concession and fixed-line customers will be without service.

This is because, according to Anatel’s legal department, it will not be possible to carry out a bidding process in view of the impasse over the concession contracts.

The agency’s president, Carlos Baigorri, stated that it takes at least two years to prepare for the event.

“With this arbitration underway, I will have to prepare a bidding process starting in 2023, but the process will only be resolved in 2024,” he said.

For Baigorri, there is a risk that the concessionaires will win. Although the industry regulation is clear in relation to the statute of limitations, it may be that the arbitrators understand the opposite, favoring the companies. And in this case, there would be no appeal.

When contacted, Oi stated that it still does not know the conditions for migrating to the new regime, which would be an option to terminate the contract in force until 2025. The company says that the decision-making on the subject “is directly proportional to the attractiveness” and will take into account the fair value and the obligations to be contracted.

Vivo did not manifest itself until the publication of this text.