The race undertaken by Telefónica, América Móvil and Telecom Italia to seize the mobile telephony assets of its rival in Brazil Oi is accelerating. In a conference call With investors, the CEO of Telecom Italia, Luigi Gubitosi, stated that the consortium of operators should not have competitors to close this acquisition.
The operators had competed with Highline Brasil, a group controlled by the Digital Colony fund, but this firm decided in early November to withdraw from negotiations to buy these assets. Its manager, Luis Minoru Shibata, indicated that the company had no intention of reviewing its offer or participating in the auction of these assets.
The auction is scheduled, in principle for December 14. The three telecos have presented an offer of 16,500 million reais (almost 2,600 million euros) for Oi’s mobile assets, in addition to committing to use the fixed infrastructures of Oi itself. Highline offered around 15,000 million.
Of course, the three telecos have in their favor the position of stalking horse in the tender, approved by the Brazilian Courts of creditors, which allows these companies to have a right of first refusal to raise their offer before the appearance of others.
In any case, the purchase process will still take several more months, since it must receive the approval of the different competition authorities.
The auction will begin the way out of the serious crisis caused by Oi’s entry into bankruptcy in 2016, with a liability then of 66,000 million reais, the largest in the history of Brazil.
During this period, creditors and shareholders have filed different disputes over Oi, the fourth telecom company in the country, with more than 30 million customers. Last August, it was finally the creditors who gave the go-ahead to the proposed modification of the Judicial Reorganization Plan that included the sale of assets.
For Telefónica, América Móvil and Telecom Italia, the operation represents an expansion of their positions in Brazil, together with the disappearance of a direct rival in this business. The Brazilian mobile market would reduce the number of mobile network operators from four to three, a situation that has occurred in large countries such as the US and Germany.
Telefónica, in turn, strengthens its position in Brazil, one of its four strategic markets, along with Spain, Germany and the United Kingdom. At the end of the third quarter, its market share was around 33%.
After the operation, the three telecos would share the assets of Oi. Of course, they must comply with the limitations of market share and spectrum that the competition authorities may propose. It would not be ruled out that any of the operators had to return spectrum.
The threat of virtual people is moving away
The fact that Digital Colony had been able to buy the mobile telephony assets of the Brazilian company Oi would have been very bad news for Telefónica, América Móvil and TIM. As JP Morgan pointed out last summer, the intentions of Highline Brasil’s parent were not to become a telecommunications operator, but to sell client portfolios and become a wholesale operator with Oi’s infrastructure.
This scenario would have caused a strengthening of virtual mobile operators (MVNOs) in Brazil, as has happened in other countries, with the consequent tightening of competition. A situation that the large operators in the country have always wanted to avoid.
Telefónica has closed an agreement with the majority unions by which 100% flexibility is provided for teleworking the work activity susceptible to teleworking, until January 2021, in all centers in Spain. UGT pointed out that the telecom has been insisted on the need to take extreme preventive measures in non-teleworkable activities and that require action on the street or at the client’s home, limiting actions as far as possible.
In the third week of each month, the Monitoring Commission will assess the situation at that time and, depending on the data of the pandemic and the measures dictated by the administration, it will decide whether or not to proceed with the reinstatement in the next month.