Anatel: Plintron's transaction in Brazil denied due to "wrongdoings and risk to the country's regulatory environment"

The Brazilian telecommunications company, Surf Telecom S.A, obtained a victory last week, in the long dispute against the mobile virtual network aggregator and enabler (#MVNA #MVNE), Plintron - a company belonging to the British #Lycamobile group

The Board of the Brazilian telecom regulator Anatel unanimously denied Plintron, the corporate transaction in the MVNA/MVNE Surf Telecom in Brazil, due to "wrongdoings and risk of the sovereignty of the country's regulatory environment."

The decision by Anatel is available here (Portuguese language). Below is a English machine translated version (Image)

The ruling states:

“There is a risk to the provision of the service due to the finding of intentional and direct infringement of the rights of users of the telecommunications service and its possible maintenance after the corporate transaction has been carried out.” - Anatel

Yon Moreira , founder of Surf Telecom, posted his response here on LinkedIn:

(Translated): "Soul Washed. Thank you Surf team: employees, partners, customers and so many friends who believed in our words. It is our fighters and honorable advocates who have shown that our faith in justice and the law has never been in vain."

In a press release from Surf Telecom it said: Despite the all-in efforts to bring onboard its thesis embraced in full by the Brazil Canada Commerce Chamber Arbitral Association to allow Plintron/Lyca to convert its minor stake to voting shares, the vigilantly and transparent Anatel during public session was firm once Plintron acted very bad against the brazilian customers and put in risk the telecom system during the pandemic, and it will be a constant risk to allow such company to have voting rights in Surf Telecom.

"We Surf team feel proud to keep our word that we are on the right side. Now we are stronger, bigger, healthier and ready to keep our purpose." - Yon Moreira, founder of Surf Telecom

Plintron made a comment to TeleTime saying: "Plintron is evaluating the terms of the decision and will take available legal action to Anatel, to bring the true facts to light and protect its interests".?

The decision by Anatel, is the latest in a long dispute between the two companies. Below is a round-up of the case(s).

The cases of Surf Telecom vs. Plintron

Plintron Holdings is said to have paid $4 million (in platform, cash, etc.) for a 40% stake in the Brazilian telecoms company Surf Telecom in October 2016 with the option to convert the preferred stock into common stock and the option to buy another 20%.

Surf's IPO suspended at the request of Plintron

In August 2020, the Court of Arbitration Conflicts, in S?o Paulo, suspended the initial public offering (IPO) process of Surf Telecom, at the request of Plintron, who claimed that the IPO was a strategy to dilute its stake and prevent it from taking control.?

Plintron shuts down the platform leaving users without connectivity during the pandemic

However, in the month before (on July 9), Plintron had turned off the platform used by Surf, without prior notice, and as a result Surf's MVNO clients and thousands of users was left with no connectivity during the Corona pandemic. Surf had to migrate customers to a new platform and re-establish mobile service, which took days to normalize.

https://www.minhaoperadora.com.br/2020/08/briga-interna-na-surf-telecom-derrubou-celulares-e-mp-entra-no-caso.html

Prosecutor Amaitê de Mello, of the 1st Criminal Court of Pinheiros, in Sao Paulo, ordered a criminal indictment against Plintron and its legal representative Brazil for having interrupted “telegraphic, radiotelegraphic or telephone” services, as well as prevented its restoration. The penalty ranges from one to three years prison and a fine, however as the shutdown took place on July 9, during the coronavirus pandemic, the penalty can double.

https://www.telesintese.com.br/wp-content/uploads/2020/08/MPSP-Plinton-do-Brasil-doc-203576737.pdf?

Who is actually in control of Plintron?

On April 7, 2021, Surf Telecom announced it had filed a request with the 1st Business Court to overturn the injunction barring the company's IPO process. In its request, Surf Telecom argue that there is an irregularity in the procedural representation and inconsistencies in the power of attorney at Plintron.

https://valor.globo.com/financas/noticia/2021/04/06/surf-telecom-tenta-extinguir-processo-que-suspende-ipo.ghtml

The document points out that "there was a change in the control of Plintron Holding, and there are indications that the administrators are acting behind the back of the controller, which does not even seem to know about the present litigation".

Surf was referring to the settlement in the case C.S.No.372, Lycamobile UK Ltd vs Plintron (January 27, 2020), where Lyca Group was given "back" its 60% stake in Plintron – but there was no ratification to the Power of Attorney at the representative of Plintron in Brazil.

The S?o Paulo Board of Trade, agreed that the documents submitted by Plintron's attorneys, contained irregularities and was therefore rejected.

The document points out that "there was a change in the control of Plintron”. The change refers to the settlement in the case C.SNo 372, Lycamobile UK Ltd vs Plintron, where Lycamobile was the majority shareholder in Plintron with 60%

Arbitrator agrees with Plintron

The dispute was taken to arbitration at the Brazil-Canada Chamber of Commerce (CCBC), where the arbitrator on May 31, 2022, awarded that Surf Telecom was in material breach of the Master Services Agreement 2017 with Plintron and told Surf Telecom to pay all outstanding invoices, as well as interest and damages for breach of the Master Services Agreement, and that Surf Telecom should allow Plintron/Lyca to convert its minor stake to voting shares.

https://www.prnewswire.com/news-releases/plintron-succeeds-in-arbitration-against-surf-telecom-301564745.html

In the arbitration case at CCBC, Surf Telecom highlighted that corporate change could only happen with approval from the national telecommunications regulator. This was contested by Plintron's lawyers. However, the decision this week by Anatel's Board of Directors, confirms the understanding of Surf Telecom.