Telefonica Loses Brazilian Appeal Over Telecom Italia Stake

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Spain's Telefonica has lost an appeal it filed against Brazil's anti trust regulator over the conflict of ownership in its Brazilian subsidiary.

Telefonica directly owns a mobile network in Brazil, and through its stake in Telecom Italia, also indirectly controls a rival mobile network.

The anti-trust regulator, CADE ruled last December that Telefonica has 18 months to resolve the problem. Telefonica appealed, but has lost.

The 18 month deadline to settle the problem has been retained, and the regulator also imposed a modest fine on the company for breaching a 2010 agreement not to put itself in this situation.

Telefonica, through its wholly owned stake in Vivo, and its indirect stake in TIM Brasil has an effective market share in excess of 50 percent, which would worry any national regulator.

Telefonica has argued that its stake in Telecom Italia has been structured so that it has no influence over the activities of TIM Brasil, so there is no competitive problems.

However, Telefonica is also known to be pressuring Telecom Italia to sell its stake in Brazil in part to resolve the anti-trust issues, and as the lump of cash would make a big dent in Telecom Italia's massive debt pile.

One option repeatedly rumoured as being favoured is to see TIM Brasil split up as a company and its assets sold off to the rival networks. In addition to resolving all the issues above, it also reduces competition in the market, which is another long term benefit for Telefonica.

A deal is expected to be done before the General Elections in October to avoid the political uncertainty of what a future government may decide to do about the issue.

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Tags: telefonica  telecom italia  Brazil 

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