Cade, Brazil’s trustbuster, has ruled that Telefonica must either exit its stakeholdings in TIM Brasil or get a new partner for its Vivo mobile subsidiary.
The Spanish giant irked Cade by breaking a 2010 agreement not to raise its stake in Telecom Italia, TIM Brasil’s parent company.
By increasing its stake in Telco, which owns 22.4 per cent equity in Telecom Italia, the Spanish and Latin American operator giant gains effective control of the Italian incumbent.
And given Telefonica also wholly-owns Vivo, Brazil’s largest mobile operator in terms of subscribers, it now claims more than half the country’s mobile market when taking into account its direct and indirect stakes in TIM Brasil.
For good measure, Cade slapped a BRL15 million ($6.3 million) fine on Telefonica for its transgressions, as well as fining TIM Brasil BRL1 million.
Analysts, quoted by Reuters, said Cade’s decision is severe and aims to punish Telefonica for failing to notify regulators of its planned Telco stake hike.
“Either Telecom Italia sells TIM in Brazil, or Telefonica must leave its stake in Telecom Italia,” Cade President Vinicius Marques de Carvalho said in a statement, quoted by the Wall Street Journal.
It seems unlikely, however, that Telecom Italia will sell TIM Brasil as it has repeatedly insisted that the Brazilian operator is a strategic asset.
Another option is for Telefoncia to find a partner for Vivo and reduce its stake to pre-2010 levels when it owned half of the mobile operator.
Cade emphasised that any new Vivo partner would not be allowed to own a stake in another mobile operator in Brazil.
That looks to rule out Oi, the country’s fourth-largest operator, which says it’s open to doing M&A business in Brazil.
Telefonica and Vivo are analysing the extent of Cade’s decision and will make an announcement when it “deems opportune,” both companies said in a joint statement, quoted by Reuters.
According to Q3 2013 figures from GSMA Intelligence, Vivo has 76.6 million subscribers, followed by TIM Brasil (72.9 million) and then America Movil’s Claro (67.4 million).
Oi has around 50 million subscribers.