“Brevity is the soul of wit.” The phrase from Polonius – ironically the verbose counselor to the King in Hamlet – is the challenge I impose on myself (and the apologies I insinuate) when talking about the things and the history of Oi, a company that I am proud to lead.
With the ratification by the AGU of our agreement with Anatel, which happened today, Oi begins to fulfill the conditions to cease being a fixed-line telephone concessionaire, its original business.
This agreement, the result of long, complex, and necessary negotiations involving Anatel, the Ministry of Communications and its Specialized Law Firms within the scope of the TCU and its SECEX Consensus, is a fundamental step in the implementation of what our second Judicial Recovery Plan dictates and in the pursuit of sustainability for our company.
However, before meeting legal requirements or harboring insinuated opportunistic businesses, this agreement resolves an old demand of the company – supported by the entire sector and its most respected voices – seeking to restore what time and technology showed to be necessary and fair: what was once a profitable natural monopoly, fixed-line telephony, and deserving of regulatory attention (universalization goals, economic and financial viability, availability, performance, and fines) disappeared. The market disappeared, the viability disappeared; only the obligations and fines remained.
In this 2024, 27 years after the promulgation of the General Telecommunications Law, of the 25 million fixed telephones once installed, less than 1 million remain. Until yesterday, Oi was obliged to rent 11 million poles to reach possible customers with copper lines – who no longer want or even know fixed telephones.
Until yesterday, Oi was obliged to spend about R$3 billion a year to maintain unused and revenue-less networks, stations, and payphones scattered throughout Brazil; we have 20 times more poles rented than fixed-line telephone customers.
It is the result of this continued imbalance – and the absolute gap between what our concession contract stipulates and the reality of the telephony market in Brazil – that led Oi to initiate arbitration against the Union back in 2020.
In present values, a claim worth tens of billions of reais. This arbitral proceeding discusses the unbelievable values of regulatory obligations, the assets sought by Oi, the continued provision of highly deficitary services for Oi, and seeks a balanced composition favorable to Brazilian society.
The Self-Composition Term now signed and ratified by the AGU arises from Oi’s demand to anticipate the end of our unsustainable fixed-line telephone concession contract and the counterproposals demanded by Anatel, diligent in ensuring premises of universalization and access (in addition to significant investments) for the acceptance of this same demand.
The company’s journey of difficulties is long and begins early. The largest judicial recovery in Brazilian corporate history, its amendment and the current second recovery plan are not offspring of fate. Just like in airplane accidents, there are numerous reasons, multiple circumstances, and a great temptation to make the complex seem simple.
When the winds of the privatization of the National Telecommunications System in 1998 offered in an auction – with a specific competitive model – the Concession of Fixed Commutated Telephone Service, it created the opportunity for Brazilian society to advance from 17 million active service lines in 1997 to 37.7 million in 2001.
Suppressed demand, technical and financial capacity for service provision, and regulatory demands for universalization (addressed in the existing balance of the contract) explain the success.
The results of this period intoxicated the parties involved: negligent or risky management practices were tolerated, corporate disputes emerged strongly, and integrations with other telecommunications giants were celebrated. In the background since 2001, the so-called smartphones; in 2007, on the eve of Oi’s acquisition of Brasil Telecom, the iPhone was launched. The world changed, and the telecom sector did somersaults.
Oi’s ongoing saga, worthy of continued attention and our best efforts, is already a major business and public policy case in Brazil, full of lessons, warnings, doubts, and some important certainties.
Without neglecting the importance of the approval obtained today for Oi, and due to the attention the news has attracted in the media and among important public figures, I highlight the greatest certainty that arises, paradoxically, from the company’s financial failure over all these years: the privatization of Brazilian telecommunications was a success!
A major success measured by the only yardstick that matters in these cases, the yardstick of the best interests of society: service universalization has advanced enormously and is still reflected in ongoing decisions, competitive prices are practiced, technological updates are frequent, and the pursuit of service quality is a constant. All this without public funding.
In the course of Oi’s difficulties, more than 40 million customers and 330,000 kilometers of cables were installed when our first request for Judicial Recovery was made, and they did not experience technical problems or service discontinuity. Oi is present in more Brazilian municipalities than the Post Office. Our customers include airlines, air traffic control, large electric companies, all elections, emergency telephones (Dial 190), and major banks. They all witnessed our difficulties and continue to be customers or users to this day.
Without technical hitches, without any losses for any of our millions of customers, the financial losses resulting from heavy regulatory obligations and their complex system of supervision and penalties – and Oi’s decisions and management – were borne solely by the company itself and its private stakeholders. Not a cent from any public budget; no need for technical intervention.
The BNDES, a participant in various financings, notably in support of the merger with Brasil Telecom, was fully repaid upon the sale of assets provided for in our first Judicial Recovery – with no discounts, no burden on the taxpayer.
And the consensual solution approved today reinforces the private sector’s absorption of its responsibilities and goes beyond even its obligations, as Oi will guarantee fixed-line telephone service in areas where there is no alternative service until 2028. Without the Self-Composition, the Union would be required to take over this service, bringing costs to public funds and real risks to service continuity, which have been averted.
Condemning privatizations for the poor economic and financial performance of one company or another is to use the “straw man fallacy” – a simple distorted argument. In the case of Oi, any losses from the myriad of factors that led to the corporate crisis were absorbed by the private sector, without financial or technical burdens on society – this is the true validation of the privatization process. Oi is the litmus test.
Finally, unable to adhere to the brevity advocated by Polonius, I find solace in knowing that, unlike in Shakespearean tragedy where almost all main characters die in the end, in the ongoing drama of Oi, Brazilian society, the main character, will emerge unscathed. As for our company, it continues the fight.
Source
Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
