U.S. Markets open in 3 hrs 51 mins

Oi case speeding up Brazil rule changes that rivals endorse

(Recasts to add details, context, background throughout)

By Ana Mano

SAO PAULO, Oct 19 (Reuters) - Oi SA's decision to request bankruptcy protection in June helped accelerate the Brazilian government's planned revamp of telecommunications licensing regulations, an official said on Wednesday, a move that may unlock investments and improve the outlook for rivals.

For years, carriers unsuccessfully tried to convince the government to allow them to own fixed-line assets when their license ended. Oi's bankruptcy filing, the largest in Brazil's history, added a sense of urgency to fixing the framework, in which assets go back to the state when the license ends, said Igor de Freitas, a board member at industry watchdog Anatel.

Current licenses expire in 2025 and carriers are urging President Michel Temer's administration to decide on the matter so they can unlock billions of reais in 4G capacity and digital services expansion.

Executives at TIM Participações SA and Telefónica Brasil SA have listed regulatory overhaul as a key condition for them to invest more in Latin America's largest telecoms market.

According to other government officials, a draft bill should be ready before year-end and then sent to Congress for approval. Outdated rules and their impact on capital spending have reduced the weight of Brazil's telecommunications industry on gross domestic product by 1 percentage point to around 4 percent of GDP this decade.

"No doubt, the Oi situation creates a sense of urgency to review the model for the entire industry," Freitas said on the sidelines of an industry event in São Paulo. "It's important that we try to end insecurity related to asset ownership."

Freitas said the impetus for the proposals came more from the inadequacy of the existing licensing-based model in the context of evolving technologies and competition among players, rather than Oi's problems.

At stake is the ability of carriers to raise additional cash by selling assets unrelated to their licenses, which would in turn lure back investment after Brazil's harshest recession in eight decades harmed revenues and spurred disconnections.

Timely changes, which could ease the burden of mandatory investments on carriers, would also relieve the government from carrying out potential seizures or bailouts in the future, officials and executives said at the event, called Futurecom.


The byproduct of a government-sponsored merger at the end of last decade, Oi succumbed to a heavy debt burden, onerous government-mandated investments in money-losing activities and years of shareholder disputes.

Government officials, industry leaders and analysts have said that, at some point, only three out of Brazil's four carriers will survive.

In June, Rio de Janeiro-based Oi filed for bankruptcy to restructure 65.4 billion reais ($21 billion) in liabilities.

A series of shareholder disputes and protracted negotiations with creditors have delayed discussions about Oi's recovery plan, which was presented on Sept. 5.

Oi has discharged PJT Partners Inc from the role of financial adviser on the debt restructuring plan, and is already looking for a replacement, Oi Chief Executive Marco Schroeder said at the same event.

América Móvil SAB, the Mexican phone carrier controlled by billionaire Carlos Slim, wants to increase capital spending in Brazil regardless of the regulatory changes, said José Félix, the company's head of Brazilian operations.

Any changes require further analysis, he said.

($1 = 3.1726 reais) (Reporting by Ana Mano and Alberto Alerigi Jr; Writing by Guillermo Parra-Bernal; Editing by Jeffrey Benkoe, David Gregorio and Bernard Orr)