Brazil’s Brisanet boosts capex amid ramp up of 5G operation

Brazil’s second largest internet service provider, Brisanet has upped its capex – and increased its costs – thanks to the acceleration of its 5G mobile operation, according to its latest earnings report.

In the first nine months of the year, the company invested 628mn reais (US$108mn), measured by additions to fixed assets and intangible assets. This compares with over 331mn reais in the same period of last year.

Brisanet also says it has amounts that have already been disbursed and capitalized but which are not yet generating revenue, totaling 493mn reais.

These are items of equipment in warehouses or in the process of being imported, and construction works in progress, according to the company.

Brisanet's 5G commercialization began at the end of 3Q23. The company acquired three regional licenses in the 2021 5G auction, encompassing coverage of Brazil's northeast and midwest regions. Huawei is its main supplier.

At the end of October 2024, Brisanet claimed to have 254,914 active customers in the mobile segment. At end-September, they were 222,823 and at end-March were 128,404.

Costs, debt and leverage

The 5G operation also impacted the company's costs and profits, as well as its debt in the period.

Brisanet reported 15.9mn reais in net income for Q3, down 49% year-on-year, which the company attributed to costs and expenses associated with the mobile segment. Net operating revenue grew by 17% to 365mn reais.

“In the last 12 months, we have recruited more than 1,000 new employees… and extended 4G/5G coverage to a population of just over 9 million inhabitants in October 2024. Following the organic growth model, which we consider to be the most effective, we continue to focus on expanding our operations and assets to meet future demand. This implies an initial increase in costs and expenses,” the ISP said in its report.

Greater costs and financial expenses, impacted by debentures, loans and bond issuances, also pressured debt. The group’s net debt surpassed 1bn reais at end-September, up from 738mn reais a year earlier.

Despite that, Brisanet argues it maintains a healthy leverage level for the sector, at 1.74 in terms of net debt to Ebitda.

“The investment cycle in the mobile segment (4G/5G), although intense, should not result in continuous negative cash flows, unlike what happened in the fiber segment. We stress that the company has a more mature fiber business, which supports the growth of the mobile segment."

Brisanet reported 7.06mn homes passed with fiber at end-September, marginally up from the previous quarter and some 111,000 more than in September 2023. The FTTH network serves the same 158 cities recorded in 2Q24 and in 3Q23.

As for mobile coverage, Brisanet added 51 more cities during 3Q24, giving it 184 in total.