Post by account_disabled on Mar 12, 2024 3:43:19 GMT -5
On August 8, 2020, the General Assembly of Creditors for Oi's judicial recovery approved a modification to the judicial recovery plan, which provided for a new strategic model for the telecom and the possibility of selling assets in Isolated Production Units (UPIs) through auction, including UPI Ativos Móveis, made up of assets linked to mobile telephony operations.
The amendment to the plan provides that the sale of the mobile operation through a competitive process represents the maximization of the value of the asset, with consequent relief related to the short investment cycle and capex for 5G.
Under the terms of the Business Recovery and Bankruptcy Law (Law 11,101/2005), the sale of UPIs through competitive means guarantees the acquirer that there will be no succession of the company's debts in judicial recovery, including those of a tax and labor nature, which makes the attractive and secure transaction.
In September this year, the consortium formed by Telefônica, Tim and Claro presented a binding proposal worth R$16,563,000.00 for the acquisition of UPI Ativos Móveis. Under the terms of the amendment to the judicial recovery plan and the auction notice, the consortium was entitled to the right to top , that is, to cover any bid higher than the value already proposed by a competitor.
At the auction hearing held on Portugal Mobile Number List December 14, 2020, in the absence of other interested parties, the binding proposal made by the consortium was approved, with the exception that the operation is subject to Cade's approval and Anatel's consent.
In this context, the sale of Oi's mobile operation to the aforementioned consortium has generated questions of a competitive nature. Some argue that such a sale should be examined with extreme caution in view of the concentration it would generate in the mobile telephony segment, with the reduction from four to three national players .
The concentration and/or reduction of players are relevant elements of a competitive analysis, but not the only ones. The antitrust authority takes into account several factors that construct that concentration scenario, sometimes using retrospective and prospective analyses. Factors relating to the probability of exercising market power, the possibility of entry and rivalry, as well as possible efficiency arguments are considered.
The fact that Oi is a company in judicial recovery (since 2016), an exceptional situation precisely to reorganize its debt of more than R$64 billion, brings an additional element that is very relevant to the competition analysis. The (imminent) insolvency of a firm as the basis of a technical competitive defense in favor of the approval of the operation, despite the concentration involved, is called the failing firm theory .
This theory, originating in the USA and recognized (but little used) by competition authorities around the world, including Cade, provides for compliance with certain requirements so that the acquisition of assets from an "insolvent" company (which may include, in this case, concept, companies undergoing judicial recovery, such as Oi) is approved despite the resulting concentration.
Among the requirements for applying the theory, under the terms of Cade's Guide for Analysis of Horizontal Concentration Acts (in line with the main international jurisdictions, including the USA and Europe), the following are mentioned: 1) if the operation is rejected, the company would go out of business or be unable to meet its financial obligations; 2) the company's assets would not remain on the market (generating a reduction in supply); and 3) the company made efforts to search for alternatives with less harm to competition (for example, seeking alternative buyers). Usually, the application is seen as an extreme and exceptional circumstance to be weighed in the specific case.