Brazil’s H1 telecom investments flat as 5G expansion cools down

Brazil's biggest telecom operators invested 15.8bn reais (US$2.77bn) in the first half of the year, flat compared with 1H23 after investments to introduce 5G technology passed their peak, according to telcos association Conexis Brasil Digital.

In Q2, telcos' investments amounted to 8.2bn reais versus 8.4bn reais a year earlier, said the entity formed by Telefônica Brasil, Claro, TIM, Oi and Algar Telecom.

“Between 2020 and 2022, the sector made significant investments to prepare the infrastructure for the installation of 5G. This same pattern was seen before the arrival of 4G, which indicates that there is an increase in investments, followed by a period of stabilization,” said the CEO of Conexis Brasil Digital, Marcos Ferrari.

According to the association, in recent years around 45% of operators' annual investments were disbursed in the first half, suggesting the figure for H2 is likely to be higher.

Nearly all the main telcos have been hitting the brakes on spending and redirecting their capex, especially Telefônica, TIM and Algar Telecom.

Meanwhile Oi is undergoing a restructuring and disposing of assets as part of its second judicial reorganization, a type of bankruptcy protection, after which it should come out as a B2B ICT services-focused company.

Major groups such as Telefônica have been seeking to bring down their capex-to-revenue ratio. 

This strategy, in a context of growth in revenues, is described by big techs as a contradiction as telcos have been calling on OTTs and tech companies to help with investments in networks.

In 2Q24, telcos' gross revenue reached 72.5bn reais for inflation-adjusted growth of 0.7% year-over-year, according to Conexis. The entity does not compile net revenues for its reports. 

Conexis said the figure reverses a downward trend in revenue in recent years.

“This was possible because, for the first time after the pandemic, companies were able to recover part of their losses due to inflation during the period." 

Revenues from mobile telephony and fixed broadband services grew 4.2% and 2.9% above inflation, respectively, compared to the second quarter of 2023, said Conexis.

Those from fixed telephony, pay TV and other services combined fell 7.4%.