Cesar crosses the Rubicon - heading back to Spain.
Dec 17, 2013
Alierta is heading back to Hispania and pouring oil on troubled waters as he goes in an effort to help in settling the toxic issue of the alleged conflict of interest in the Brazilian market where both Telefonica and Telecom Italia have some serious vested interests.
Brazil's anti-trust authority, the Conselho Administrativo de Defesa Econômica, (or Cade, for short) was founded only in 2012 and is just beginning to find its feet and bare its teeth - as it were.
Flexing its muscles for the first time in any meaningful way as far as the Brazilian telecoms market is concerned anyway, it has ruled that Telefonica’s position in the country's mobiile market is over-dominant and anti-competitive and that the Spanish company must return to the status quo ante that pertained prior to 2010.
It's all a bit complicated but bear with us: Vivo, is the biggest operator in Brazil and Vivo is now effectively controlled by Telefonica. Thus by dint of its hegemony over Vivo and in combination with its direct and indirect holdings in Telecom Italia, Telefonica actually controls more than 54 per cent of the Brazilian mobile market.
Now, Telecom Italia also has significant holdings in TIM Brazil (the second largest mobile player) which Cade has been investigating and the anti-trust body has found Telefonica to be in blatant breach of an agreement, signed in 2010, in which it agreed not to further increase its holdings in Telecom Italia.
Therefore, Cade has ruled that Telefonica must either sell its stake in TIM Brazil or change partners where Vivo is concerned. Topping off the unpalatable sundae with a particularly sour little cherry, Cade has also fined Telefonica US$6.3 million and TIM Brazil some quarter of a million dollars for breaking the agreement. The actual amounts involved are derisory and meaningless as far as Telefonica and TIM Brazil is concerned but the attendant bad publicity has hurt both companies.
In a submission made to the Brazilian telecoms regulator, CNMV, Telefonica claims that Cade's ruling is "unreasonable" and adds that it is considering taking legal action to have the decision rescinded.
Meanwhile, Julio Linares, sometime COO of Telefonica also resigned from the board of Telecom Italia but it is not yet clear whether the departures of the two Spaniards will actually bring the arguments and recriminations to an end.
Telecom Italia shareholders, both big and small, are unhappy and restive and, this very Friday (December 20), will vote on a substantive motion to dismiss the entire Telecom Italia board on the grounds that Telefonica holds far too much sway over the Italian incumbennt.
If it wasn't for the fact that this is a wrangle between Latins, one might well describe the situation as Byzantinne.