The Brazilian telecom sector is a hotbed of deal-making activity in 2020. And regional consolidation is a theme.
While industry observers are focused on the high-profile auction of Oi’s mobile assets—which is scheduled to take place on December 14—a series of broadband-centric deals have taken place under the radar.
Today, we explore the companies who are pulling the strings.
Bordeaux Multi-Strategic Investment Fund
Operating Units: Sercomtel, Copel Telecom
While a number of smaller ISPs have changed ownership this year, the Bordeaux Fundo de Investimento em Participacoes Multiestrategia (Bordeaux Multi-Strategic Investment Fund) has arguably scooped up two of the most prominent service providers.
In August, Bordeaux was crowned as the winner following the privatization auction for regional operator Sercomtel Telecomunicacoes.
The City Council of Londrina, the majority shareholder, staged the privatization auction via the B3 stock exchange in São Paulo. State power company Companhia Paranaense de Energia (Copel) and various minority shareholders also offloaded their stakes.
The auction involved a modest upfront fee of $9.1 million (BRL50 million) alongside an additional BRL80 million commitment.
Subsequently, in November, Bordeaux was named as the winning bidder for Copel-backed Copel Telecom, following an 18-round auction that was also staged via the B3 stock exchange. Copel confirmed that the final bidding price reached $447.1 million (BRL2.395 billion), noting that this price represented a 70.94% premium on the BRL1.401 million minimum bid stipulation.
In winning the auction, the fund faced stiff competition from regional operator Algar Telecom, which reportedly offered BRL2.204 billion for the telco.
The Bordeaux Fund is said to be controlled by businessman Nelson Tanure and former minister Helio Costa.
Triple Play Brasil Participacoes (Conexao Fibra)
Operating Units: Cabo Telecom, Conexao Telecom, Direta, MEGA Sistemas, Multiplay Telecom, Tecnet, and Outcenter
Another player that has seemingly emerged from nowhere is Triple Play Brasil Participacoes (Conexao Fibra).
The fiber operator has acquired nine regional broadband providers in recent years, and now presides over a total of 8,000 km of fiber-optics. Its networks pass through 1.1 million homes and businesses.
Triple Play Brasil planned to stage an initial public offering on October 14, with the company’s shares set to be traded on B3’s Novo Mercado stock exchange, under the CONX3 ticker symbol.
The indicative price range was set at $2.26-$2.81 (BRL12.50-BRL15.50). And 93,297,884 shares (40% of the total) were to be included in the base offer, with a view to generating between BRL1.17 billion and BRL1.45 billion.
Ultimately, the share sale was scrapped, with Triple Play blaming market conditions. The telco will now pursue private investment as it seeks to add as many as six new ISPs to its ranks.
Ultimately, the share sale was scrapped, with Triple Play blaming market conditions. The telco will now pursue private investment as it seeks to add as many as six new ISPs to its ranks.
The group’s main shareholder is understood to be investment fund ALAOF Brasil Midia Holdings, with 98.28% of the total capital; Gilbert Victor Minionis has been named as the minority shareholder.
EB Capital
Operating Units: Sumicity, Mob Telecom
Brazilian private equity fund EB Capital—which is run by Eduardo Sirotsky Melzer, Fernando Iunes, Luciana Antonini Ribeiro, and Pedro Parente—has also made its presence felt in recent years.
EB first signposted its intentions in December 2018, when it agreed to the takeover of a 60% controlling stake in regional operator Sumicity. The transaction concluded in April 2019.
Subsequently, in August 2020, EB acquired a controlling stake in regional B2B operator Mob Telecom. EB Capital is currently in the process of raising $373.3 million as it seeks to consolidate a number of regional fiber-optic players under the EB Fibra banner.
The investment firm expects to end the year with around 800,000 customers and reach the 2 million milestone by 2025 via a mixture of organic growth and strategic acquisitions.
Indeed, the company has already lined up nine prospective acquisitions, which are in the final stage of due diligence. Some of these deals are expected to close before the end of 2020. As such, the investment firm expects to end the year with around 800,000 customers and reach the 2 million milestone by 2025 via a mixture of organic growth and strategic acquisitions.
Vero Internet
Operating Units: BD OnLine, NWNet, Efibra, PowerLine, G4 Telecom, Viaceu, ViaReal, City10, MKA Telecom, INB Telecom, and Clic Rapido
Vero Internet was created by Vinci Partners, an alternative investment platform specializing in asset management, back in January 2019. The telco initially combined the assets of eight ISPs in Minas Gerais, namely: BD OnLine, NWNet, Efibra, PowerLine, G4 Telecom, Viaceu, ViaReal, and City10.
In terms of recent developments, this summer saw Vero Internet agree to back-to-back takeover deals for three of its smaller regional rivals: MKA Telecom, INB Telecom, and Clic Rapido.
The new additions are expected to be rebranded by the end of November 2020.
As a result of the new transactions, Vero Internet says it now serves 325,000 customers in 90 cities, up from 134,000 in 39 locations pre-mergers.
Ora Telecom
Operating Units: FiberLink Telecom, InfoWeb Telecom, Itech Telecom, Interativa Telecom, and Mega Via
In September 2020, five regional ISPs teamed up to create an enlarged player that operates under the Ora Telecom name.
The initial four participants were FiberLink Telecom, InfoWeb Telecom, Itech Telecom, and Interativa Telecom, who were later joined by Mega Via. The tie-up was said to have been facilitated by mutual behind-the-scenes partners.
In total, Ora Telecom serves 52,000 customers across selected parts of the Federal District, Piaui, and Maranhao. However, the company plans to extend its brand to other regions in 2021 via agreements with ISPs in Para, Ceara, Pernambuco, and Rio Grande do Norte.
Ora Telecom currently offers download speeds of up to 400Mbps via fiber-to-the-home infrastructure.
Tom Leins
Tom Leins is a Senior Research Analyst for TeleGeography’s GlobalComms Database. Based out of the company’s UK office, he also contributes to the company’s daily CommsUpdate newsletter, which includes his popular weekly MVNO Monday round-up. MVNO industry aside, Tom has developed a strong specialization in the U.S., Latin America, and the Caribbean, tracking mergers and acquisitions, spectrum auctions, regulatory developments, market opportunities, and growth trends.