Wednesday, November 27th 2019

OIBR3:BZ Foreign Bidders Likely to Participate in ’s 5G Spectrum Auction By: Valeria Camerino

A number of foreign telecoms, the auction and expects it to facilitate is key to the future of distressed former including AT&T, Verizon, Vodafone the entry of new players in the Brazilian incumbent and has already done and Huawei, have shown interest in market,” the “considerable work” to draft the new participating in Brazil’s upcoming 5G spokesperson said. regulations so that the new law will spectrum auction, which is scheduled come into effect no longer than three for the second half of 2020, Carlos Abadi, Telecoms Reform months from Bolsonaro’s approval. managing director with New York-based Abadi explained that the main impact financial advisory DecisionBoundaries Abadi said that no further of the law will be in terms of asset said. Abadi was recently an advisor to consolidation in the Brazilian telecoms reversibility, that is to say, under the a dissident group of bondholders at industry is expected to take place until new regulations, asset-heavy telecoms Brazilian telco Oi and is following the the law converting concessions into such as Oi will be able to pledge such process closely. authorizations is ratified. assets for financing or sell them. He said that AT&T, which is still The bill, known as (PLC) 79/2016, has Oi will therefore be able to sell and awaiting regulatory approval from been rubber-stamped by the Brazilian lease back some assets and sell the telecoms regulator Anatel for its Senate in September, but president Jair real estate it does not need. Abadi acquisition of Time Warner, is very keen Bolsonaro is yet to ratify the reform, estimated that proceeds from Oi’s real to take part in the auction. which will then need to be implemented estate assets could fetch the company Verizon is also expected to take part. by Anatel. R$2bn to R$4bn. Although Vodafone is “not dying” Abadi said that he expects Bolsonaro “The assets have been marketed to bid in the auction, they would be will approve the bill. but no transaction has been closed interested in acquiring some spectrum because finance providers want reps “at the right price”, Abadi said. “Even if it is not exactly and warranties,” Abadi said. He believes that Huawei will also what he wanted, it goes 75% He added: “Any buyer would be participate in the process although completely irresponsible to acquire the Brazilian government could face to 80% of the way. the assets before the telecoms bill is opposition pressure from the US state I don’t think he will veto it. ratified by the president.” department, in view of the ongoing Maybe he will ask for some trade tensions with China, Abadi noted. amendments but even if Oi An Anatel spokesperson told CTFN that the 5G spectrum auction in Brazil they don’t happen, he will Abadi said that all three main will award spectrum rights of use in still sign it,” players −America Movil’s , four different frequency bands: 700 Carlos Abadi, managing director with Telefonica-owned Vivo and Telecom MHz, 2.3 GHz, 3.5 GHz and 23 GHz. The New York-based financial advisory Italia’s TIM Brasil− are looking to bid for amount of spectrum licensed may total DecisionBoundaries parts of Oi. more than 2,000 MHz. “At least two of them have been According to the spokesperson, “Even if it is not exactly what he working with competition lawyers for the auction proposal will probably be wanted, it goes 75% to 80% of the way. I the last two years and I think they will submitted to public consultation next don’t think he will veto it. Maybe he will bid jointly,” Abadi said. month, with the auction expected to be ask for some amendments but even if He believes that from a competition held in the second half of 2020. they don’t happen, he will still sign it,” perspective, there is consensus in Brazil “There are no restrictions for foreign Abadi predicted. among regulators and market players investors. On the contrary, Anatel aims According to Abadi, Anatel is fully that Brazil is a three-operator market, at the widest possible participation in aware of how the approval of the law and therefore, he ruled out that a Wednesday, November 27th 2019

four-to-three merger would be blocked Abadi said that activist investor Elliott, company. on antitrust grounds as has occurred on a shareholder in TIM’s parent Telecom “There was no opposition from a number of occasions in Europe. Italia, has been considering this option. creditors to complete that sale but the However, he believes that in the dos Santos’ are a very difficult family companies’ investment budgets, 5G “It probably works in a very and they are the natural buyer,” Abadi comes ahead of buying parts of Oi and said, adding that dos Santos wants to low interest rate scenario but that, most likely, Oi’s rivals will wait for acquire the stake at a bargain price. the outcome of the spectrum auction the outlook for 2020 is such He noted that Oi has been trying before allocating money for a joint that Brazil’s Central Bank will unsuccessfully to attract interest from acquisition of Oi. adopt a more conservative other parties but potential suitors are Asked whether TIM, which has long fully aware that if they buy the Unitel monetary policy,” been rumored as the most likely stake, they would find themselves in Carlos Abadi, managing director with suitor for Oi, could decide to launch a the same situation as Oi and would New York-based financial advisory standalone bid for the company, Abadi struggle to receive dividends. DecisionBoundaries said that he personally worked on a A source close to Oi said that the capital structure for such a deal and he company’s current priorities are selling concluded that it was impossible, unless Unitel the Unitel stake, hopefully by the end of an injection from a financial sponsor the year, and their real estate assets. took place. Oi is also engaged in negotiations The source close noted that last “I modeled it every way I could…TIM for the sale of its 25% stake in Angolan month Oi sold a building in Rio de does not have a solid enough capital telecoms Unitel, which have been Janeiro’s Botafogo area, reportedly for structure to support that deal (with Oi),” complicated due to an ongoing dispute R$120m. Abadi said. with billionaire entrepreneur Isabel Dos A spokesperson for Oi told CTFN that He noted that TIM itself does not Santos, the daughter of former Angolan the company analyzes all the business have very deep pockets and that by president Jose’ Eduardo Dos Santos and possibilities that arise in the telecom acquiring the whole of Oi they would chair of Unitel, who also holds a 25% market. make themselves extremely financially interest in the company. “Regarding the 5G auction, the vulnerable. In October 2015, Oi-owned PT company is waiting for the publication “It probably works in a very low Ventures filed an arbitration claim of the notice to find out and study the interest rate scenario but the outlook against Vidatel Ltd., a BVI company conditions that will be defined by the for 2020 is such that Brazil’s Central owned by dos Santos, Geni SA., and government,” the spokesperson added. Bank will adopt a more conservative majority owned by General Leopoldino AT&T, Verizon and Vodafone did not monetary policy,” Abadi said. do Nascimento, an infiuential return requests for comment. Huawei Commenting on rumors reported businessman and military figure in was not available for comment. by CTFN earlier this year that private Angola, as well as by Mercury Serviços equity funds would be interested in de Telecomunicações SA., owned acquiring TIM and merging it with Oi, by Sonangol, the Angolan state oil

©2019 CTFN. All rights reserved.