CADE conditionally approves acquisition of Oi Móvel by firms Tim, Claro, and Vivo

The Administrative Council for Economic Defense (CADE) cleared, subject to remedies, the acquisition of Oi Group's assets by the companies Tim, Claro, and Telefônica Brasil (owner of the brand Vivo). To mitigate competition issues, the authority cleared the deal last Wednesday (9 February 2022), contingent on the companies' compliance with a merger control agreement.

In December 2020, Oi's mobile assets were sold at a government auction. At the time, Tim, Claro, and Telefônica Brasil made a joint bid and acquired the assets of the Oi Group's production units.

After intense scrutiny, the Tribunal of CADE concluded the exit of the Oi group from the market of mobile communication would result in a high concentration in the mobile services market in Brazil, bringing the number of players down from four to three.

In contrast, the authority understands Oi' bankruptcy could deepen market concentration more than the acquisition itself since the main market leaders would absorb the majority of the company's current customers.

Commissioner Lenisa Prado voted for the conditional clearance of the deal. In her vote, Ms Prado stressed, amongst other negative effects, that Oi's bankruptcy would also affect the telecommunication sector as a whole.

The insolvency would affect landline, broadband, and data communication services, in addition to other basic services that depend on the company's telecommunication infrastructure, such as electronic payments, online shopping, postal service, bank branches, as well as social security and financial systems.

To mitigate the competition issues and get the approval from CADE, the companies signed a merger control agreement. The agreement provides for a set of measures that facilitate the entry of new players and growth of competitors in the mobile telecommunication market.

"The remedies proposed by CADE, along the conditions imposed by Anatel [the Brazilian Telecommunications Agency] and the market regulation, can significantly reduce entry barriers and raise the number of competitors, mitigating the competition concerns identified during the fact-finding of the case", said Ms Prado.

According to the president of CADE, Mr Alexandre Cordeiro, "This is one of the most relevant cases we have in recent years, and it directly affects consumers. Society owns the legal interests protected by the antitrust law. In this sense, we must fulfil our organisational mission of protecting consumers".

President Cordeiro and Commissioner Luiz Hoffmann followed the vote of Commissioner Lenisa Prado, whilst Commissioners Paula Azevedo, Sérgio Ravagnani, and Luis Braido – rapporteur of the case – voted for blocking the deal. After a 3-3 split vote, the President gave his casting vote and decided to clear the merger subject to a merger control agreement.

Antitrust remedies

One of the remedies in the agreement requires the divestiture of about half the base transceiver stations (BTS) the companies Tim, Claro, and Telefônica Brasil acquired from the Oi group. The divestiture should happen in an independent manner, through a public offering.

The base transceiver stations at issue consist of antennae and radio communication equipment installed in a given area for the provision of mobile communication services. The remedy does not include other towers and constructions possibly located in the same place nor radio frequency rights.

The other remedies are offers for wholesale national roaming access to its network and agreements with small MVNOs related to its technologies (including 5G) and IoT and M2M connectivity.

TIM and Telefônica also committed to allow competitors to lease radio spectrums acquired from the Oi group in Brazilian municipalities and provide rivals with Radio Access Network sharing agreements.

08700.000726/2021-08.