The General Superintendence of the Administrative Council for Economic Defense (Cade) approved on Monday (9) the purchase of Nextel through the sure. The deal valued at $ 905 million was announced in March 2019. Approval took place without restrictions.
In terms of considerations, Cade points out that Nextel is an “eminently regional” operator, with a low market share when compared to the others. In addition, the agency points out that the competitors “have the capacity to absorb any demand that has been diverted due to any attempt at market power”.
That’s because in July 2019 Nextel had a national market share of 1.53%, while Claro had 24.71%, being the second largest operator in number of customers. With the purchase of Nextel, Claro continues in second place, losing to Vivo, with 32.33% of the market, in addition to distancing itself from TIM in the dispute for the 2nd place, with 24%.
The superintendency also states that competitors such as Vivo, TIM and, to a certain extent, Oi, are able to compete for prices and quality in any geographic markets. Cade’s study even shows offers of control plans from the four largest operators, all with similar values and internet franchises.
That is precisely why the opinion points out that, in addition to the ease of switching operators through portability, the mobile phone market has “relative homogeneity in prices and types of packages, with a high substitutability between products from one operator to another”.
Finally, Cade concludes that “there is no risk of any type of market closing due to the vertical integration analyzed”. That way, Nextel can breathe easy: the operator was at risk of running out of money if the merger was not approved.
Reduction for three operators would worry
Much is said about consolidation in the mobile phone market, and Cade has already given its message: the reduction in the number of large players (from four to three), regardless of the arrangement “would result in a clear concern about increasing the possibility of coordinated action among them ”, such as the formation of a“ cartel ”among the active companies.
This news comes at a difficult time, since Oi’s financial situation is not healthy: the operator is going through a complicated process of judicial recovery with billionaire debts. The operator tries to raise R $ 2.5 billion in cash to avoid running out of money in 2020, and the board itself does not rule out a possible break-up that would allow the sale of the mobile business.
The operator has focused on expanding its fiber optic network to increase its presence in the broadband market through the FTTH format. The operator’s strategic plan doesn’t speak much about Oi Móvel.