Claro, TIM and Vivo buy Oi's wireless operation for R$16.5bn
In a court-supervised auction without surprises and with a single bid, telecom carriers Claro, TIM Brasil and Telefônica won on Monday the wireless operation of rival Oi for R$16.5 billion. As of September, Oi, which has been in bankruptcy reorganization, had 33.7 million wireless clients.
TIM, the Italian carrier, will take most of Oi's users (40% of the total, or 14.5 million) and spectrum. Because of this, it will pay R$7.3 billion. Telefónica's Brazilian unit, which operates under brand Vivo, will pay about R$5.5 billion for some 10.5 million clients. América Móvil's Claro will pay R$3.7 billion and be entitled to 32% of Oi's customers.
"For the market, it's more rational to have three big players. There would be room for four, but given that Oi will have to sell its operation, it is a scenario I regard well," says João Julio Matos, partner of asset manager Helius Capital.
In October, Vivo commanded 33.6% of the Brazilian cellphone market, according to consultancy Teleco. Claro had 26.5% and TIM, 22.3%. Oi came in fourth with 15.9%. Even with the migration of Oi customers, the relative positions of the three will not change.
The sale of Oi's wireless assets still depends on approval by regulators Cade and Anatel, Judge Fernando Viana, of the 7th Business Court of Rio de Janeiro, stressed during the auction on Monday.
To convince antitrust watchdog Cade to approve the deal, one measure the buying trio is considering is to reduce their market share in some states. Cade sources say the deal will not pass without reduction of their respective shares. "The question to answer is whether Brazil can have only three carriers," a Cade commissioner wondered.
Leonardo Euler de Morais, president of the Anatel, the telecommunications regulator, acknowledged the complexity of Oi's situation. "The process of economic and financial recovery is rife of challenges, either financial, operation, strategic, judicial and regulatory," he said in a note.
He stressed that the terms of the deal had not been detailed yet, reason for which he said "it is prudent to wait the formalization of the request of prior approval to the agency." Pointing out that any "judgment would be rushed," he added there was no point even in commenting hypothetically about a case similar to that of Oi.
"The lesser of two evils," said Vivian Braga, partner for competition...
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