Fiber in Brazil: the consolidation process continues

The merger between Vero and Americanet announced to the market in early July could result in the country's largest independent telecommunications provider, with around 1.9 million revenue-generating units (RGU), taking into account 1.4m fiber customers, particularly strong in the south and southeast of Brazil. Regional providers have played a big role in fiber expansion to reach areas that the biggest operators (Vivo, Claro, Oi…) couldn’t manage to cover in a country as large as Brazil, leaving a very fragmented market. The new entity combining Vero and Americanet will be the 4th biggest fiber operator in Brazil While Americanet has a 27-year history and a broad trajectory in mergers and acquisition, Vero Internet was born in 2019, from the integration of eight regional suppliers in Minas Gerais led by the Vinci Partners fund, and completed four years of mergers with medium-sized providers. Together, the two companies have acquired 48 providers over the years. The deal will see Vero absorb Americanet and the combined group might have national ambitions (either organically, via M&A operations and using a neutral fiber network). Having a look at the ranking of fiber providers in Brazil, the new entity would indeed rank 4th in terms of subscribers, behind the national players Vivo and Oi. The latter is still facing huge financial difficulties regarding the restructuring of its debt since it declared bankruptcy in 2016, and probably doesn’t have the assets to sustain the growth of its FTTx subscriber base. Overall, Internet Service Providers have been consolidating over the last few years to gain subscribers but also to cover a larger network of towns and cities and extend the infrastructures in what we could call “the first wave of acquisitions”. Among key actors of this consolidation movement, 3 others recently stood out among many others : Unifique, Vero and Triple Play. Desktop and Unifique acquired several companies and went public (390k and 257k clients now). On one hand, Unifique acquired 27 companies between 2018 and 2021 and 3 so far in 2023. On the other hand, Triple Play is now rebranding its different operators under a unified brand, named Alares. Middle-sized operators have been rolling out fiber at an intense rhythm across the country and the number of fiber premises has increased almost exponentially. Meanwhile, the quantity of fiber subscribers hasn’t followed. Even if Brazil has one of the highest fiber household penetration rates in Latin America with fiber accounting for 70.5% of broadband subscriptions at the end of 2022 it remains very costly to connect potential subscribers to the existing network. As shown on the above histogram, there is a gap of more than 80 million potential subscribers to be filled. Meaning, several operators have developed a...