Prosecutor recommends that Cade barre buys from Oi and investigate TIM, Vivo and Claro

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The MPF (Federal Public Ministry) asked CADE (Administrative Council for Economic Defense) to veto the purchase of Oi’s mobile networks by competitors TIM, Telefônica (Vivo) and Claro.

The regional attorney of the Republic and MPF representative at Cade, Waldir Alves, also requested an analysis of the alleged violation of the rule that requires informing the agency in advance about merger, acquisition or consortium formation operations.

In addition, he asked for the opening of a process to investigate possible anti-competitive practices on the part of the three interested parties.

Sought, Oi, TIM, Vivo and Claro had not commented until the conclusion of this text.

Alves states that TIM, Telefônica and Claro signed a contract on July 17, 2020 and should have notified Cade at the latest on the same date. The body was only notified on February 8, 2021, already to analyze the purchase of Oi’s assets by the companies.

Law No. 12,529/2011 provides for the prior control of mergers, understood as those involving, for example, merger, acquisition or when two or more companies enter into a consortium or joint venture. If the rule is violated, the penalties include the nullity of the operation, a fine and administrative proceedings.

The companies signed the contract among themselves and then jointly made a first offer for Oi Móvel of more than R$15 billion, and a second offer of R$16.5 billion. After an auction with no other interested parties in December 2020, the three announced, in January 2021, the conclusion of the purchase agreement.

The process was opened at the request of competitor Algar. After being questioned, the companies denied Cade “the constitution of any corporate vehicle to carry out the offer or enter into a consortium contract”. But Alves says that “there are no doubts about the formation of a consortium/partnership/agreement”.

In addition to not informing Cade in advance of the execution of the contract between them, Alves says that the companies still ended up, with the partnership, signing an “unbeatable consortium” and excluding individual competitors from the dispute – such as the company Highline, which had previously offered R$ 15 billion for the assets.

“The consortium action, in the present case, consciously substituted the risks of competition between the leading companies of the market, generating potential deleterious effects to the development of the market”, he affirms.

Alves claims that the consortium stipulated before Oi that the buyers should be treated as “single party”, when, in reality, TIM, Telefônica and Claro intended to acquire the assets of Oi in a segregated way.

“The clauses were provided for in a joint contract formed between the three giants of the sector, in a clear division of Oi Móvel’s assets between the three competitors, which already hold a high ‘market share’ [participação de mercado] in the telecommunications sector, now owning 98% of the national mobile service”, says Alves.

For him, the agreement would increase concentration in the sector and the facts “show not only the formation of a consortium, but the market division itself, the probable exchange of sensitive information and the illegality of premature integration”.

At the time of the auction, TIM informed that it will disburse R$ 7.3 billion and will have 14.5 million Oi customers, equivalent to 40% of the total.

Telefônica, which operates under the Vivo brand, will spend R$5.5 billion and receive 10.5 million customers (about 29%).

With a disbursement of R$ 3.7 billion, Claro will keep the rest.

“If there are indications of anti-competitive practices […], as in the case under analysis, it is the duty of the antitrust authority to investigate them”, says Alves.

In his view, the remedies being proposed to mitigate the effects of the purchase of Oi Móvel by the three competitors — such as leasing the radio frequency spectrum to third parties and the infrastructure access mechanism for small businesses — are “tenuous, old and ineffective.” to ward off competitive risks”.

The sale operation is part of a repositioning effort by Oi to try to get out of the judicial recovery process started in 2016 to deal with a debt of R$ 65 billion.

On January 31, Anatel (Agência Nacional de Telecomunicações) granted prior consent to the purchase by imposing conditions on the operation.

The sale of the assets buried the plans to create the Brazilian supertele, a project of the PT governments. The request for judicial recovery was the way out to deal with a crisis that started after the merger with Portugal Telecom, in 2013.

Part of the strategy of creating “national champions”, the merger began to go wrong the year after its announcement, in the face of a financial crisis among the Portuguese partners.

Source: Folha

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