Following Telefonica’s move to gradually increase control over Telecom Italia earlier this week, the future of the two incumbents’ mobile operations in Brazil have come into question.
Telecom Italia controls TIM Brasil while Telefonica operates…
Following Telefonica’s move to gradually increase control over Telecom Italia earlier this week, the future of the two incumbents’ mobile operations in Brazil have come into question.
Telecom Italia controls TIM Brasil while Telefonica operates under the Vivo brand in the country. In the eyes of antitrust regulators this could lead to a conflict should the Spanish company wrest control of the Italian telco.
Telefonica’s move to take control of Telecom Italia is contingent on obtaining regulatory approval in Brazil, as well as Argentina.
Some reports have suggested TIM could be broken up and split between the three other main network operators. Others have said that Brazil would not countenance falling from four operators to three, implying that TIM could be sold.
Brazil’s communications minister Paulo Bernardo has already been quoted as saying that if Telefonica gained control of two operators in the country that would be considered a significant concentration and a very negative development for competition.
However, President Dilma Rousseff has been reported to distance herself from those comments and stated that the final decision will be left with Cade, the antitrust regulator.
Speaking to TelecomFinance Ricardo Barretto, a partner at Sao Paulo law firm BKBG, said that a number of factors will play into the future of TIM.
“In other relevant markets, the Brazilian antitrust agency has agreed on high levels of concentration of market share,” he said. “There exists no lack of precedents.”
“If that happens, certain aspects of the legal and regulatory framework of the telecom sector related to mobile telephony may have to be changed in order to host such a concentration, but I would say that it is not impossible.”
Barretto qualified his comments by saying it was still very early in the process to make too many guesses as to the destiny of TIM. He added that the regulator may want to keep four players in the market.
“On the other hand, if Anatel decides to keep the four-player model, other [potentially] interested players seem to be Vodafone and GVT (the fixed-line and broadband operator owned by Vivendi),” he said.
“A split of TIM into three portions does not look to be the probable path.”
Informa analyst Marceli Passoni agreed with Barretto’s final point.
“I think splitting TIM Brasil between Claro, Oi and Vivo is unlikely to happen because it would concentrate the market,” she said.
TIM Brasil and Vivo are Brazil’s two largest mobile operators by market share. At the end of June Vivo had 28.29% of wireless subscribers and TIM had 26.8%. America Movil’s Claro was next with 24.68% and Oi trailed in fourth with 18.46%, according to Informa data.
She expected the regulator to be in favour of keeping four players in the market and felt that a sale of TIM was the most likely outcome.
“TIM Brasil is a good asset to sell, it’s growing fast,” she said. “Operators from Europe or the USA might be interested as revenues in their domestic markets are flattening, whereas TIM would be an opportunity to continue to grow.”
She suggested that Vodafone, which has been interested in entering Brazil’s wireless market in the past, may be tempted to bid. The British telco has agreed to sell its minority share in Verizon Wireless for US$130bn. Even if it uses a large proportion of that sum to repay debt and to pay out a dividend to investors, it will leave the UK based operator with a sizeable war chest.
In August Vodafone entered Brazil after securing an agreement with Datora Telecom to partner in the M2M market.
