‘We will continue to be consolidators in this market’ – Brazilian ISP Alares

Amid continued consolidation of the internet market, Brazilian internet service provider (ISP) Alares wants to be seen as a buyer, rather than a seller.

“Alares is a protagonist in this movement and we will continue to be consolidators in this market,” CEO Denis Ferreira told BNamericas.

The group, one of the 10 biggest ISPs in the country in terms of fiber accesses, is planning new M&As and betting on the corporate segment as growth vectors.

The company has just announced a new brand, Alares Empresas, under a revamped strategy to address the corporate segment, one in which competitors such as Americanet (now called Vero), are well positioned. Brasil TecPar is another ISP shifting its focus to B2B.

Around 5% of Alares' present customer base are B2B clients, which together represent approximately 10% of the company's revenues. Alares operates in 180 cities across seven Brazilian states.

The focus on B2B will be mainly in the wholesale market, offering capacity to third parties with its fiber backbone, as well as services for small, medium-sized and even large companies, said Ferreira.

Alares' national backbone extends over 23,000km and, according to the executive, recently underwent a process to upgrade capacity. The CEO rules out relying on neutral networks to expand the firm's fiber infrastructure. 

Regarding greenfield expansion, he sees the market again moving sideways in terms of fiber rollouts in 2024.

“I don’t see the market making big moves like it did before in terms of fiber deployments. The companies, including ours, are now focusing much more on growing where they already are, adding customers to the network deployed and growing ARPU,” he said.

Alares' main network equipment suppliers include ZTE, Zyxel Networks, Huawei and Nokia. Alares' billing and CRM system was developed by local firm Interfocus and its ERP by Brazil's Totvs.

At the beginning of June, Alares completed the consolidation of all its systems into a single network operations center (NOC). This facility is located in Ourinhos in São Paulo state.

Ferreira did not mention the capex, but said that the investment in this NOC was “significant” and most of the money went on infrastructure and staff.

M&As

Traditionally active in M&As, Alares made its last acquisition in October 2023 when it took over Webby. Since then, the company has been focused on completing the integration process, involving back office, systems and personnel.

With this process now concluded, the next step is eliminating the Webby brand and replacing it with Alares. 

Ferreira remained tight-lipped on details of new M&A deals, but said the company is looking at opportunities and hinted that a new acquisition might be announced before year-end.

Despite the intense competition and an ongoing "price war," Alares has been gaining customers month-by-month since last year, not counting its acquisitions, he said.

However, he said the battle over prices is distorting the market.

“It's not healthy and it creates profitability problems, especially for companies that have high churn. If you have high churn and drive prices down, you're going to have serious problems,” underlined the executive.

CONSOLIDATION

The fiber broadband market is going through a new wave of M&As. In 2023, two important players, Vero and Americanet, announced a merger.

Also last year, as first reported by BNamericas, Ligga, the biggest ISP in Paraná state, began negotiations with neutral network V.tal, whose partners include Oi and funds linked to BTG Pactual.

More recently, Telefônica admitted that it was engaged in talks over the acquisition of Desktop, the biggest ISP in São Paulo state. Market sources say that the acquisition has been settled, but has not yet been announced.

All of these deals between stronger and more established players are coming in parallel with takeovers of smaller ISPs by larger firms, something which has been happening for some time now.