Telefonica has been told by Brazil’s antitrust regulator Cade that it cannot hold its current stakes in Vivo and Telecom Italia’s (TI) subsidiary TIM Brasil because they are direct competitors in Brazil’s mobile market.
Cade has said that…
Telefonica has been told by Brazil’s antitrust regulator Cade that it cannot hold its current stakes in Vivo and Telecom Italia’s (TI) subsidiary TIM Brasil because they are direct competitors in Brazil’s mobile market.
Cade has said that Telefonica must either reduce its stake in TI’s controlling shareholder Telco – which it took control of in September – thus giving it sway over TIM, or find a new partner to take joint-control of its direct subsidiary Vivo.
Telefonica previously held Vivo equally with Portugal Telecom before buying it out in 2010. The Brazilian regulator green-lit the deal on the basis that Telefonica would not increase its minority stake in Telco. Cade has recently fined the Spanish incumbent R$15m (US$6m) for breaking that accord.
Commenting on the decision, Bernstein Research analyst Robin Bienenstock said in a note: “Telefonica has a strong interest in seeing TIM Brasil broken up. They recently spent another €700m (US$956m) buying its option to increase control within Telco. Telefonica has done so principally to avoid the risk of TIM Brasil being merged with GVT as that would pose a significant threat to Telefonica’s second largest market – Brazil.”
Earlier this week TI denied that it was in talks with any buyers regarding its majority stake in TIM. In a strongly-worded statement it said that there was not any “ongoing contacts with potential buyers of the subsidiary, that a sale or combination with other operators are being pursued or that purchase offers have been received, not even unsolicited”.
Marco Fossati, a rebel investor in TI, has today said that Cade decision should not lead to TI selling TIM as that would devalue TI shares.
Telefonica bought more shares in Telco – which controls TI with a 22.4% stake – to give it a majority although it still owns less than half of its voting shares. However, it has the option to take a majority of voting shares in Telco next year.
