In a meeting at the Cade headquarters in Brasilia, directors also said that a new Vivo partner would not be allowed to own a stake in a rival Brazilian firm.
The ultimatum from Cade suggests that the approval of Telefónica’s increased stake in TIM’s parent company, Telecom Italia, is unsteady, Reuters reports.
The regulator’s decision is thought to link back to a performance agreement signed by Telefónica in 2010, in which the company agreed not to be involved in TIM Brasil’s management decisions or raise its stake in Telecom Italia.
Cade has indicated that it is hoping to reduce Telefonica’s position in the market to its pre-2010 level, when it owned half of Vivo and a minority stake in Telco, the company that controls Telecom Italia.
As well as being ordered to exit its stake in TIM Brasil, the Spanish operator has also been fined $6.3 million by Cade for increasing its stake in Telco.
TIM Brasil was fined $420,000 for hiring a consultancy firm owned by Telefónica.
Both Telefónica and Telecom Italia have so far declined to comment on the news.
