LatAm fiber deals power on amid soaring demand, capex pressures

As demand for fiber broadband and investment in these assets is impacting the cash positions of operators and internet service providers, acquisitions and joint ventures are becoming more common in Latin America.

Deals are being closed especially in Brazil, due to its territorial extension and the large number of service providers offering fiber services in smaller localities.

“This is a global trend, of players focused on real estate being holders of fiber, towers and datacenters on the edge [edge computing]. We will certainly see more and more investments in this regard in the coming months, by national and international players,” Renato Pasquini, global research manager at Frost&Sullivan told BNamericas.

Just recently, Brazilian investment fund EB Capital acquired control of Wirelink, operator of the northeast fiber backbone, for an undisclosed sum. Fortaleza-based Wirelink reports a fiber network of over 35,000km in 360 localities in 16 states.

Wirelink's network also connects key datacenters and landing points of submarine cable systems, such as sites operated by Equinix, Telxius, Lumen, GlobeNet, Angola Cables and Tivit.

Focused on critical infrastructure, EB Capital is on a shopping spree and had already acquired other ISPs and fiber operators. Its portfolio now includes Sumicity, Mob Telecom, Vip Br Telecom, among others.

The fund is led by Pedro Parente, who served as minister of planning and of mines and energy in the government of former president Fernando Henrique Cardoso. 

Parente was also president of Petrobras until June 2018, during the government of Michel Temer.

TELEFÓNICA

Also in Brazil, Telefónica announced on July 2 that FiBrasil, its fiber joint venture with Canadian fund CDPQ, went operational.

The wholesale fiber network created by Telefónica Brasil, Telefónica Infra and CDPQ is present in 34 cities, covering 1.6mn households, and by the end of this year expects to cover 500,000 additional households.

Telefónica group and CDPQ each own 50% of FiBrasil, in a co-controlling governance model. The new company will have a fully independent team, led by the CEO and an executive body, counting more than 150 employees, Telefónica said.

FiBrasil aims to take fiber to 5.5mn homes and businesses over the next four years in a wholesale model for ISPs and operators. 

Telefônica Brasil will be the anchor-customer with a 10-year contract, and will rely on the infrastructure of FiBrasil to increase its own fiber network, targeting 24mn Brazilian households by the end of 2024.

“Neutral fiber networks represent the concrete opportunity to accelerate the population's access to ultra-high-speed internet to all locations in Brazil,” Telefónica said in a statement.

Telefónica also announced the completion of the sale of 60% in its Chilean fiber network to global investment firm KKR around 10 days after the transaction was authorized by the country's antitrust authority.

Dubbed InfraCo, the JV is considered Chile's first private wholesale fiber network.

The partners said the business kicks off operations with 2.4mn fiber-to-the-home (FTTH) households. The target is to increase the FTTH footprint to at least 3.5mn households by 2023 while offering wholesale services to more than 40,000 service providers.

InfraCo will focus on underserved areas: more than two-thirds of households covered will be outside high-income urban areas, according to Telefónica and KKR.

SOUTH AMERICA

In addition to Brazil and Chile, fiber deals are gradually spreading in other South American markets.

In a recent interview to BNamericas, Manuel Andrade, CEO for North America and director of international operations at optical provider Padtec, said that in addition to Brazil the company sees opportunities in wholesale and neutral regional operators such as Ufinet, Internexa or Silica Networks – some of which are already clients.

“This is a revolution and we don't yet know where it's going to go. The model is slowly spreading to Paraguay and Colombia,” he said. In Argentina, cooperatives and SME telecom operators are also investing in fiber, Andrade said.

Spain's Ufinet CEO Íñigo García del Cerro highlighted the expansion of fiber in South America.

“Last year, and certainly the pandemic has accelerated this trend, we started the development of around 200,000 homes-passed in different countries, such as Paraguay, Colombia, Argentina, Brazil,” García said during the Capacity LatAm telecom infrastructure event in April.

In February, Ufinet brokered a joint venture fiber deal with Bogotá’s public telco ETB to accelerate FTTH deployments in Colombia's capital. 

ETB has invested 20-25% of its revenues annually in the expansion of networks, CEO Sergio González Guzmán told local daily La República.

The network will kick off with an offer of more than 1.2mn homes-passed (households already connected with fiber). The initial plan consists of doubling that figure to about 2.5mn homes in three years in the Bogotá area.

ETB is upbeat about the JV reinforcing its wholesale fiber provider strategy, CTO Efraín Martínez Monroy told BNamericas recently. 

The company expects the business to get a green light from authorities in coming weeks.