Brazil approves reduction in mobile players, with conditions

Brazil’s antitrust body has given the green light to the proposed acquisition of mobile operator Oi by its three rivals, but has imposed a series of conditions on the deal in a bid to preserve competition.

The conditions include requirements on the three buyers to provide wholesale and MVNO deals across all technologies, including 5G and IoT, as you might expect with a deal in which the number of market players is reduced. But most interestingly, the regulator wants the three remaining operators to sell off around half of the base stations they will acquire through the purchase of Oi’s assets, which potentially opens the way for a new market player.

Specifically, the telcos will have to sell antennas and radiocommunication equipment for the provision of mobile services, but not towers, buildings, other passive infrastructure or spectrum usage rights, the Conselho Administrativo de Defesa Econômica (CADE) announced on Wednesday. The sales will take place independently and through a public offering, it said.

CADE’s announcement comes just over a week after Brazil’s telecom regulator Anatel approved the deal, imposing a few conditions of its own. These included roaming offers and MVNO deals, voluntary commitments on the effective use of spectrum, and safeguards for Oi’s customers.

Clearly, the authorities are concerned about the impact on competition resulting from the reduction in national mobile players to three from four, which is a particularly big deal in a market the size of Brazil. There were 353.3 million mobile connections in Brazil by the end of last year, according to Anatel, an increase of close to 20 million year-on-year, while 5G accesses – based on DSS – numbered 1.21 million and counting. But to an extent the hands of the regulators were tied.

After years of uncertainty and a judicial reorganisation as a result of bankruptcy protection, Oi was put up for sale in 2020 and agreed a 16.5 billion reais (US$3.2 billion) deal with its three MNO rivals at the end of that year, the plan being for its assets to be carved up between them. TIM, the smallest of the big three, will pay the most and acquire the largest share of assets, including 40% of Oi’s customers, 49 MHz of spectrum, and just under half of its mobile sites, or around 7,200 locations. The rest, in varying shares, goes to America Movil’s Claro and Telefonica’s Vivo. Those figures are based on the December 2020 agreement announced by the operators, but could have changes somewhat by the time the deal closes; Oi has actually increased its market share in recent months, for example, ending 2021 with 16.6%.

It is not clear at this stage how the divestment of base stations will take place and which of the acquiring operators will be affected, although doubtless they will all be involved in some way.

But returning to the regulators, it’s fair to say that they had little choice but to approve the deal. When push came to shove, the three telcos were the only ones to submit a formal bid for Oi, and without finding a buyer the operator would almost certainly have gone under. There is no new national player waiting in the wings, as far as we know, because starting from scratch – even with the purchase of some existing assets – in a market the size of Brazil is not a palatable option. Winity II, which picked up a nationwide 700 MHz licence at last year’s 5G spectrum auction in Brazil, is being pitched as a new national MNO in some circles, but is actually more likely to opt for an open access network model.

The regulators’ competition remedies could well give Winity II a leg-up, and help some of the country’s smaller mobile players build some scale, but essentially we are talking about a reduction to a three-player market here.

So while European telecoms industry stakeholders will be watching with interest, as rumours of consolidation in Italy, Spain and the UK continue to swirl, there are probably too few similarities between the markets to sway any decision-making further afield. But it will be fascinating to see how things pan out in Brazil over the next couple of years.