BRASILIA Dec 4 Brazil antitrust watchdog Cade
ruled on Wednesday that Spain's Telefonica SA must exit
its direct and indirect stake in wireless carrier TIM
Participações SA or seek a new partner for its Vivo
mobile phone unit.
In a meeting that took place at the regulator's headquarters
in Brasilia, directors at Cade also ruled that a new partner for
Vivo, Brazil's largest mobile phone carrier and part of
Telefonica Brasil SA, will not be allowed to own a
stake in another rival in Brazil.
Wednesday's ruling, which is definitive, gave a strong
indication that the approval of Telefonica's stake increase in
Telecom Italia SpA - TIM Brasil's parent company - faces serious
challenges in Brazil. Cade's decision addressed Telefonica's
failure to meet a so-called performance agreement signed in 2010
by which the company agreed not to participate in TIM Brasil's
management decisions or raise its stake in Telecom Italia.
In addition to ordering the Spanish company to exit its
stake TIM Brasil, Cade imposed a 15 million reais ($6.3 million)
fine on Telefônica for increasing its stake in Telco, which owns
22.4 percent of Telecom Italia SpA - TIM Brasil's parent
TIM Brasil was also fined 1 million reais by Cade, after the
wireless carrier hired a consultancy firm owned by Telefónica.
Analysts said Cade's decision was severe and aimed to punish
Telefonica for failing to notify regulators in advance of its
plan to increase its stake in Telco. While Cade was likely to
impose fines on both firms, it was expected not to force
Telefônica to sell the stake it acquired in Telco during the
capital increase, Susana Salaru, a telecommunications analyst
with Itaú BBA, wrote in a client note this week.
"Telefonica and Vivo are currently analyzing the extent of
Cade's decision and will make a statement when it deems
opportune," both companies said in a joint statement.
Telecom Italia spokespeople based in Milan did not reply to
requests for a comment.
Shares of TIM Brasil gained 3 percent on Wednesday, while
those of Telefonica Brasil shed 0.1 percent.