Brazil 4G Auction Suspended by Government Spending Watchdog

Aug 05, 2014 11:14 am ET

(Updates with Anatel comment in fifth paragraph and Oi share price in eighth paragraph.)

Aug. 5 (Bloomberg) -- Brazil’s auction of 4G wireless airwaves was suspended by the agency that monitors government spending, citing grave irregularities in its design.

Telecommunications regulator Anatel, which is responsible for the auction, has 15 days to respond to questions from the Federal Court of Accounts, or TCU, as the watchdog agency is known. Anatel can’t publish the auction terms until it has addressed the concerns, TCU’s press office said in an e-mail.

The auction is a “once in a lifetime” opportunity to gain capacity for high-speed data service, Credit Suisse Group AG analyst Andrew Campbell has said. While a delay could help indebted phone carrier Oi SA, it puts pressure on President Dilma Rousseff’s plans to generate revenue for the government, just two months before voters decide whether to re-elect her.

The spectrum up for bid in the auction is located in the 700 megahertz frequency band, and part of it is currently occupied by television broadcasters. Those companies will have to move to other frequencies to make room for the wireless operators, and telecommunications carriers have expressed concern that the airwaves could have signal interference.

Anatel will provide the clarifications requested by the TCU, according to an agency press officer who asked not to be named because of internal policy. The auction can only be held 30 days after bidding terms are published.

Surplus Goal

Any significant delay could force Anatel to wait until after the Oct. 5 presidential election to hold the auction. Rousseff is counting on the airwave sale to produce revenue to help the government reach its primary surplus goal of 1.9 percent of gross domestic product.

Oi, Brazil’s fourth-largest carrier, could benefit from a delay. The company’s merger with Portugal Telecom SGPS SA is leaving it with a debt level that would make it difficult to bid on airwaves in the near future, analysts including Kevin Smithen of Macquarie Group Ltd. have said.

Shares of Rio de Janeiro-based Oi were down 5.5 percent to 1.37 reais at 11:44 a.m. in Sao Paulo.

“Cautionary Measure”

TCU Minister Benjamin Zymler invoked the suspension against Anatel’s auction by filing a type of injunction known as a “cautionary measure.” TCU’s members are appointed by Congress and the president to oversee government spending as part of the legislative branch.

The TCU is reviewing the case in secret at the request of Anatel, so the details of the cautionary measure aren’t public, said a press official for the spending watchdog who can’t be named under the agency’s policy. The measure is valid with Zymler’s request, and he will present it for confirmation during this week’s session on Aug. 6, the press official said.