CADE imposes conditions to protect competition, including requiring Sky Brasil and Time Warner to remain separate legal entities

Brazil’s competition watchdog has given the green light to AT&T’s proposed acquisition of Time Warner, subject to certain conditions, but without requiring asset sales.

The approval from the Conselho Administrativo de Defesa Econômica (CADE) came on Wednesday, as expected, the U.S. telco announced.

Brazil was one of the last remaining markets to give the deal the go-ahead. Its telecom regulator Anatel passed the transaction over to CADE in June, but the watchdog was hesitant, declining to give the thumbs-up without first referring it to a tribunal, citing concerns over its impact on market competition.

AT&T and Time Warner have signed a five-year agreement with CADE whereby they undertake to comply with a series of obligations designed to remedy competition issues.

In Brazil the merger will result in a vertical relationship between the Time Warner pay TV activities and the satellite TV services provided by AT&T-owned Sky Brasil, CADE noted.

"Time Warner has strong market power in the programming and licensing of channels and content in the country," CADE quoted Gilvandro Araujo, its reporting councillor in this case, as saying.

"Meanwhile, the national pay TV market is almost a duopoly, with Sky and rival [America Movil’s] Telecom Americas together claiming around 80% of subscriptions," he said.

According to Araujo, the vertical integration of companies with high market shares could result in an alignment of interests that would damage competition in both segments, through the exchange of sensitive information and establishment of beneficial trading conditions, amongst other things.

Thus, CADE’s remedies include maintaining Sky Brasil and the Time Warner channels as separate legal entities, licensing programming to other platforms, and appointing an independent consultant to monitor compliance with the obligations.

Wednesday’s announcement means AT&T has received all the required approvals for the US$85.4 billion merger from jurisdictions outside the U.S.

The deal remains under review by the U.S. Department of Justice (DoJ), AT&T said, adding that it still expects the transaction to close by the end of this year.