Company Trend Analysis - Vivo Most Likely Buyer Of Sky Brazil - 02 OCT 2017

BMI View: Should the Brazilian authorities block the deal between AT&T and Time Warner on competition grounds, AT&T's best option would be to sell Sky Brazil . Vivo w ould be the most likely buyer, as that would allow it to offer satellite pay-TV services beyond the coverage of its wireline infrastructure.

Brazil's antitrust watchdog, CADE, said that AT&T's acquisition of Time Warner poses a high risk to competition. This could mean a delay for final approval of the USD85bn deal, which the two companies are seeking to complete by end-2017. The combined giant would go against a law in Brazil that explicitly prohibits pay-TV players from owning programming content. Through its acquisition of DirecTV, AT&T gained an indirect 93% stake in satellite pay-TV player SKY Brazil. As a result, Time Warner's content such as Warner Bros. and HBO would clash directly with the law. Since Brazil is among the remaining countries (along with the US) that have to sign off on the deal, AT&T will want to resolve the issue quickly.

We expect AT&T to sell off its stake in Sky Brazil should there be regulatory issues. As Sky Brazil is not one of AT&T's core services and a timely approval is a priority, we believe it will want to opt for the simplest solution. The telecoms giant has been mulling whether to sell Sky Brazil since October 2016, but as a self-sustaining business the company has not had to make a decision right away. CADE's statement means that this process can speed up very quickly.

Major Player Up For Grabs
Brazil Pay-TV Market Shares (%), May 2017
Source: Anatel, BMI

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