According to telecompaper, Telebras will no longer participate in the EllaLink submarine cable project linking Brazil and Europe for lack of resources, Telebras said in a statement to the Brazilian stock market regulator. In the end of 2018, Telebras exited as a shareholder of EllaLink by swapping its equity interest into irrevocable rights of use (IRU) under a share swap agreement. And now, Telebras is expecting to terminate its contractual rights in the EllaLink cable system. The withdrawal of Telebras won't have significant impact on the EllaLink project.
EllaLink submarine cable project is supported by Brazilian Government and European Union, aiming to be an information highway directly connecting Brazil and Europe, bypassing the United States due to security concerns. The EllaLink network is designed to offer 72 Tbps of capacity between Europe and Brazil, linking the major hubs of Sao Paulo and Fortaleza with Lisbon, Madrid and Marseilles.
Initially, the state-owned Brazilian operator Telebras participated in the EllaLink submarine cable project as the landing party in Brazil and a shareholder of EllaLink.
As Telebras was short of funds, which had no way to participate with the 25 percent stake in the EllaLink cable project. In September 2018, Telebras announced to swap its equity interest in the companies EllaLink and Cabos Brasil Europa for the right to use the EllaLink submarine cable. The transaction was concluded on the last day of 2018, when the Telebras signed the share swap agreement for “irrevocable use right”. Telebras had an official announcement on the swap transaction on January 2, 2019. Since then on, Telebras has exited as a shareholder of EllaLink and hasn't held any operational role in the deployment in the EllaLink cable system.
In the statement, Teletras said it sent a letter to its partner EllaLink Ireland to amicably terminate the aforesaid share swap agreement announced on 02 January 2019. Telebras is expecting to terminate its contractual rights in the EllaLink cable system due to its own stated lack of resources.
The reason cited was that Telebras was included in the Fiscal and Social Security Budget for 2020 with the status of dependent state-owned company, which means it was unable to assume any payment for the EllaLink project in 2020.
It was reported, the Brizilian Ministry of Economy recommended recently that Telebrás carry out a public tender offer (takeover bid), with the purpose of buying minority securities and eliminating its shares. According to the Ministry, as a state-owned company, Telebrás runs the risk of unduly transferring public resources to private minority shareholders. This is because when the Union injects funds into the company to cover any gap, they are converted into income and, ultimately, contribute to the profits that will be distributed to shareholders.
EllaLink cable project had its financial closure and CIF (contract-into-force) of the Supply Contract with ASN on 31 December 2018. The BELLA (Building the Europe Link to Latin America) Consortium became the major financer for the EllaLink project. The BELLA provided €25 million ($27.2m) in financial support for the EllaLink cable system.
In October 2019, EllaLink was granted operator licenses by the National Telecommunications Agency (Anatel) in Brazil and the National Communications Authority (Anacom) in Portugal. EllaLink is capable of acting as landing party in Brazil and Portugal.
In November 2019, EllaLink Group and Telxius signed a collaboration agreement to land EllaLink submarine cable at Telxius's Fortaleza Cable Landing Station.
The withdrawal of Telebras from the EllaLink project seems to be no significant impact on the project. The EllaLink submarine cable system was scheduled to be ready for service in early 2021.