Bloomberg reports the superintendent of competition at Anatel, Carlos Baigorri, as saying that the watchdog considers Oi SA – the country’s most indebted telco – as the weakest domestic operator and a candidate for breakup if it fails to secure licences at the upcoming wireless frequency auction. ‘What will happen with market consolidation will depend on the 700MHz auction – it will define the future of telecom in Brazil,’ Baigorri said in an interview in Brasilia. ‘The company that doesn’t win in the auction, the market will very probably want to break up.’ In the superintendent’s opinion any Brazilian operator missing out at the auction would be ‘at risk’, although he declined to comment on how any breakup would unfold. ‘We have to see which will be Oi’s priorities in its turnaround, what role the 700MHz auction will have,’ said Baigorri, adding ‘If, for example, Oi can’t raise the funds to participate, which I hope they can do, probably Oi will be broken up.’ The press office of Rio de Janeiro-based Oi SA reportedly declined to comment.
Industry watchers speculate that Oi’s debt pile could lead it to sit out of the government’s 4G auction this September – despite it being its only viable opportunity to gain bandwidth capacity for mobile broadband internet services. With the big four Brazilian cellcos increasingly jostling for position and chasing ever fewer new customers, and with existing users migrating to bandwidth-hungry smartphones, any failure to secure 700MHz spectrum could leave a carrier ‘in jeopardy’, Baigorri said.
The government plans to hold the auction in September this year and is expected to publish its minimum reserve fees within the next week. However, Baigorri notes that given the 700MHz band requires 95% fewer antennas to achieve the same coverage as the 2500MHz licences sold in 2012, any operator failing to secure the lower band spectrum will be forced to stick with its existing spectrum or lease 700MHz capacity with no guarantee on rental costs.