Cade has upheld its decision to fine Telefonica R$15m (US$6.6m) last December and order the Spanish incumbent to reduce its influence in the Brazilian mobile market.
The antitrust authority took exception to Telefonica owning Vivo and indirectly…
Cade has upheld its decision to fine Telefonica R$15m (US$6.6m) last December and order the Spanish incumbent to reduce its influence in the Brazilian mobile market.
The antitrust authority took exception to Telefonica owning Vivo and indirectly controlling rival TIM Brasil’s parent Telecom Italia (TI) through its majority stake in TI’s controlling shareholder Telco.
Following Cade’s rejection of the appeal Telefonica is now preparing to take the regulator to the courts to overturn the ruling, according to a number of Brazilian newspapers.
Cade imposed the fine on Telefonica late last year for breaking an accord agreed in 2010 when it took sole ownership of its then-50/50 joint venture Vivo. The regulator green-lit that deal on the basis that Telefonica would not increase its minority stake in Telco.
However, in September last year Telefonica agreed to buy more of Telco to put it in charge of the holding company. Cade told Telefonica that it must either reduce its stake in Telco or find a new partner to take joint-control of its direct subsidiary Vivo.
Telefonica argues that it does not vote on matters at TI that affect TIM and took the step of removing its two representatives on TI’s board, which it said at the time was “to reinforce [its] strong commitment with the previous obligations undertaken by Telefonica to remain separate from Telecom Italia’s Brazilian businesses”.
This week it was reported that TI and Telefonica had clashed over the future of TIM. TI CEO Marco Patuano wants to expand TIM via an eventual merger with Vivendi’s Brazilian broadband operator GVT, while Telefonica wants to break up the operator and split its assets between the three other operators: Vivo; America Movil subsidiary Claro; and Oi.
GVT then waded into the row, saying it opposed a break-up of TIM and that if necessary it will work with the government and regulator Anatel to help avoid a split, which it described as an “unthinkable” prospect. The fixed-line player added that it had not held talks with TIM regarding a merger.
Last autumn Bernstein Research analyst Robin Bienenstock said that Telefonica had a strong interest in seeing TIM broken up. Bernstein, who has since left the research firm, wrote that the Spanish incumbent had taken control of Telco principally to avoid the risk of TIM being merged with GVT, as that would pose a significant threat to Telefonica’s Brazilian operations – its second-largest market.
The situation is further complicated by other shareholders in Telco preparing to sell their stakes, although it is unclear how this would affect Telefonica’s position in TI and the wider situation in Brazil.
