TIM, Telefônica Brasil and Claro will take Oi to arbitration

The telecommunication operators TIM, Telefônica Brasil, which operates the Vivo brand, and Claro will initiate arbitration against Oi in relation to alleged breaches of the terms of the contract for the sale of mobile telephony assets to the three companies.

The arbitration procedure was announced this Monday (3) by TIM, Telefônica Brasil and Claro.

Oi did not immediately respond to a request for comment sent by Reuters.

The arbitration would come after the three operators asked, in mid-September, a reduction of R$ 3.2 billion in the total purchase price, alleging divergences in technical information about the mobile telephony assets.

TIM said this Monday that, faced with what it classified as an “express violation” by Oi of the dispute resolution mechanisms provided for in the contract, “the purchasers had no other alternative but to enter an arbitration procedure”.

The arbitration, to be held at B3’s Market Arbitration Chamber, will decide on the effective value of the post-closing price adjustment of the transaction, according to TIM.

Claro Participações and Telefônica Brasil did not provide additional details about the arbitration request, saying only that the procedure is due to breaches of price adjustment clauses.

The three operators won the right to Oi’s mobile telephony assets at the end of 2020, after a joint offer of BRL 16.5 billion. The deal, which was concluded only in April this year, was scrutinized by the antitrust agency Cade and the telecommunications agency Anatel.

Oi even negotiated exclusively with Highline do Brasil, which had made an offer of R$ 15 billion for the assets in 2020, but the deal did not go ahead.

In September, the purchasing companies alleged discrepancies in technical information about Oi’s mobile assets, such as working capital and net debt adjustments, which would result in a lower amount to be paid. The argument is that this information could only be obtained after the transaction was closed.

Oi disagreed with the R$3.2 billion adjustment proposed by rivals – which includes a portion already withheld by the companies for potential adjustments – and stated in mid-September that they had “procedural and technical errors”, with “mistakes in methodology, criteria, assumptions and approach adopted”.

Of the BRL 1.8 billion — the difference between the BRL 3.2 billion notified by the purchasing companies and the total already withheld by them — BRL 769 million would be returned to TIM, BRL 587 million to Telefônica Brasil and BRL 383 million to Claro, from Mexico’s América Móvil.

In September, Oi said it would take the appropriate measures.

The company stated at the time that it would have a deadline to manifest itself, which, based on the deadlines disclosed, has not yet expired, and then another 30 days for the parties to negotiate a solution in good faith.