Tweet of the Week for June 2-8 2012

Posted on Saturday, June 09, 2012

#Nextel BR (#NII) denied right to sell to consumers. Judge says license forces only to sell to Co.s or professions. ow.ly/bo5zo #yg

Full Disclosure: I have advised Nextel International in the past through my association with Yankee Group.

Admittedly this looks like the case of a lower level judge ruling in favor of established players (the law suit in question was brought by Telecom Italia Brasil — TIM BR) who will get overturned as the suit rises up the judicial hierarchy.

I won’t ask how or why the judge decided to rule the way he did. That might lead me into speculations that could in turn lead into legal problems. I will say I find it strange that Nextel’s US lawyers – a breed usually known for being hyper-conservative bordering on paranoid – would let Nextel Brasil offer consumer services if it were obvious that the license wouldn’t permit this.

There is the possibility that Nextel BR’s leadership knew about the restriction but hid this from the Board thinking “No one will care” or “That was so long ago that it no longer matters” or “We’ll work this out when we get to it” (nudge-nudge, wink-wink, say-no-more to quote a famous Monty Python sketch). This is a particular vice of certain old-school Latin American managers (no matter how old they might be) but I have a higher opinion of NII BR’s managers than this.

Much more likely that the license itself isn’t explicit but the preamble to the license ruling was explicit that the authorization was for NII BR’s activities in the business market. This could be interpreted to mean that the company could only sell to personas juridicas i.e. companies rather than personas naturales i.e. human beings.

In a later twitter exchange on the absence of NII BR from the Brazil 4G auction, @miguelsmirnoff connected the two stories together, suggesting that – for now at least – cut off from the consumer market in Brazil, NII BR stayed out of the auction.

I agree that is a possibility although I also find it an excess of caution.

Spectrum auctions arise infrequently. This particular auction has been well over a year in gestation. They are opportunities that cannot be missed. Changing licenses to remove any doubt about provision of consumer services can come simultaneously or later.

Bottom Line: I suppose the Brazilian government can be cocky about this kind of “legal instability” since one relatively new player (Sky BR) and a brand new player (a George Soros vehicle) have come to the 4G party. But this has to put a chill on any serious player thinking about investing in Brazilian telecom, especially combined with Brazil’s “industrial policy” measures like the requirements for Brazilian-provided equipment. That… or some people – very senior people – in NII BR’s executive suite should get fired.

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