The approval or not of the CADE (Administrative Council of Economic Defense) of the purchase operation of Nextel by Claro, will not be of easy resolution for that antitrust agency, taking into account the various intricacies of the Brazilian telecommunications market. That is why it has consulted various actors and even accepted as part of the process the main competitors of Claro, namely Vivo, TIM and Oi.
Basically the main problems of this operation are two -spectrum and market share-, especially in the states of San Pablo and Rio de Janeiro. To these one could add other secondary issues related to towers and ratings for their installation.
The company most concerned about this merger is TIM Brasil, with a market share of 23.53%, since being in direct competition with Claro (24.03% market share), it will not be able to fight for the second place in a market led by Vivo, with a participation of 31.37%. Furthermore, in the states of San Pablo and Rio de Janeiro, Claro's progress is substantial, since in some areas it becomes competitive and surpasses the market leader.
Thus, between Vivo and Claro, in a combined manner, they would have control of almost 70% of the market, which would practically constitute a duopoly in two of the three states with the largest population in the country, as indicated by the directors of TIM in the document presented before the CADE.
The issue is more complicated in terms of spectrum. In the state of San Pablo, for example, the merger with Nextel will take Claro to a total of 206.5 MHz available, against 155 MHz of Vivo, 115 MHz of TIM and 85 MHz of Oi. Similar situation will also occur in the state of Rio de Janeiro, where Claro will have 197 MHz, while Vivo has 160 MHz, TIM, 119 MHz and Oi, 100 MHz. To this we must add that in almost all cases the spectrum belonging to Nextel is underutilized, which further favors Claro's position to expand its service offering.
TIM understands that this difference in the availability of spectrum with respect to the rest of the competitors gives Claro, in the short and medium term, levels of competition that are much higher than the other operators.
Vivo also emphasizes the availability of tower infrastructure that Claro will have in the main cities where Nextel operates, but especially in San Pablo and Rio de Janeiro. In the Telefónica subsidiary, they point out that this distortion will cause a great difference in the capacity to absorb demand, which will surely lead to a deterioration in the levels of competition that the Brazilian mobile phone market currently has.
So far the CADE has not requested the opinion of the Anatel (National Telecommunications Agency), consultation that was requested by the parties involved in this process. It should be taken into account that by March next year, the bidding of spectrum for 5G is planned and there is great expectation about the type of contest that the regulator will plot to distribute these frequencies among competitors.