Divided, Cade (Administrative Council for Economic Defense) approved with restrictions, this Wednesday (9), the purchase of Oi’s mobile networks by telephony operators Tim, Vivo and Claro for R$ 16.5 billion.
Three of the six directors voted to disapprove of the deal, which was only approved due to the mining vote of the body’s president, Alexandre Cordeiro de Macedo.
The amount to be paid will be divided between the three companies. Tim will disburse R$7.3 billion, Vivo, R$5.5 billion, and Claro, R$3.7 billion.
Last week, Anatel (National Telecommunications Agency) had already approved the sale of Oi with restrictions for the three competitors.
In summary, the remedies proposed to reduce market concentration provide for the provision of infrastructure to third parties without any type of discrimination, especially in terms of price.
A commitment was also established to offer the market, on a secondary basis, Oi frequencies that are not being used. Frequencies are avenues in the air through which operators carry their signals.
The operation, in practice, means a slicing of Oi between the three biggest competitors, which led to questions from other companies in the sector —Algar and Sercomtel— with the Federal Public Ministry.
According to Anatel’s decision, which was ratified by Cade, the three companies should share Oi’s customers among themselves. Tim should have around 14.5 million (36.25% of the total), Vivo with 10.5 million (26.25%) and Claro with the remaining 15 million (37.5%).
With this apportionment, companies expand their current market share. Vivo, which previously had around 83.3 million customers –or 32.9% of the market– now has 93.8 million (37.1%).
Claro, which previously had a portfolio of 70 million subscribers (27.7% of the total), jumps to 85 million (33.6%). Tim, which served 52 million customers (20.6% of the total), will increase to 66.5 million (26.3% of the total).
Although Claro is the operator that will inherit the most customers with the purchase of Oi, Tim was the most interested. This is because, in addition to the customers, the operator controlled by Telecom Italia will have frequencies and other infrastructure (network) inputs from Oi mobile in areas where it had not made massive investments on its own.
As a first step towards migrating customers, companies will have to send a notice about the transfer. If they do not accept, the telecoms will have to migrate them to the operator desired by the customer. Until then, the customer will continue to be served by Oi.
The sale of Oi was carried out in court because the company is in judicial recovery. The deal was a necessary condition for the company to be able to get out of the ditch of judicial recovery. In 2016, with a debt of R$65 billion, Oi went to court to try to avoid bankruptcy.
The financial situation was discussed this Tuesday (8) between the directors of Anatel (National Telecommunications Agency) and Cade. The meeting had been scheduled at the request of the president of the antitrust agency, Alexandre Cordeiro.
During the auction process for the operator’s mobile arm, Sercomtel, currently controlled by businessman Nelson Tanure, presented a purchase proposal through Copel Telecom. Tanure was once an important shareholder of Oi and today remains a minority shareholder.
Highline and Algar Telecom also made offers in court, but they were unsuccessful.
To Cade, Sercomtel and Algar accused Tim, Vivo and Claro of forming a consortium behind the scenes without previously informing the competition defense body about the deal that their competitors were trying to carry out, something prohibited by the legislation that regulates free competition in the country.
Algar Telecom and Sercomtel asked for the deal to be disapproved or for approval with structural remedies that would at least guarantee the existence of a fourth major competitor in the market.
Among the measures suggested by the companies was the sale of Oi’s assets regionally to local competitors or new entrants.
Tim, Vivo and Claro, through their lawyers, reinforced before the trial session at Cade that the deal was transparent and discussed before the Court, ruling out any type of irregularity or illegality.
Three councilors —Luis Henrique Braido, Paula Farani de Azevedo and Sérgio Ravagnani—voted against the operation. For them, the remedies aimed at reducing market concentration as much as possible were not enough.
“The medicines are cosmetics,” Ravagnani said during his vote.
For counselor Paula Farani de Azevedo, who ended her term this Wednesday, the operation could not be approved on the grounds that it would be the lifeline for Oi.
“It is not up to Cade to guarantee the economic financial viability of Oi”, said the counselor. “The operation is essential to make possible the judicial recovery of Oi and the remedies were not enough to handle it.”
In his speech, Braido was harsh in considering that the companies’ proposed remedies represent a blow to Cade’s image.
“The company [Oi] disregarded the proposal of an entrant [Copel Telecom] to have a 10% premium, probably,” Braido said. “As a judge, it seems to me that the plaintiffs bet on the state’s power of capture and didn’t want to negotiate firm remedies, because they were sure it would go ahead.”
With the tie, the deal was approved by a mining vote of President Alexandre Cordeiro de Macedo.
Among the companies that brought greater negative weight to the Ibovespa this Wednesday, Oi’s shares fell 2.88%. Tim and Vivo advanced 5.06% and 2.72%, in that order.
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