Merger, IPO and investment fund on Brasil TecPar’s radar

Internet service provider Brasil TecPar is considering the entry of an investment fund into its capital structure, mulling an IPO and not ruling out a merger with a similar-sized ISP along the lines of the recently announced Vero-Americanet combination.

“Of the largest ISPs in Brazil, Brasil TecPar is the only one that still does not have an investment fund behind it. We are open to movement in this direction, and we’re talking with several funds,” COO Wendel de Melo (in photo) told BNamericas.

Brasil TecPar is the country's 13th largest fixed broadband provider in accesses – out of around 13,000 ISPs officially registered in the country.

It had over 400,000 customers as of end-June, 382,000 of which were for fixed broadband. Of these, 97% were via fiber optics. In June 2022, its fixed broadband base comprised 275,187 accesses.

So far, being under the umbrella of an investment group has not necessarily been a priority for the company. Melo said that Brasil TecPar managed to reach a healthy level of revenue and profitability with its own cash and a much lower investment level than its peers.

The company, as it is not listed, does not disclose hard figures.

But fresh resources may be needed with competition intensifying, higher levels of service quality being demanded and greater investment needs arising. What is more, Brasil TecPar's more direct competitors are starting to join forces.

According to Melo, who spoke to BNamericas on the sidelines of the Netcom networks, telecom and installation event in São Paulo, the Vero-Americanet merger “rattled” the market.

The merger has the potential to create the largest ISP in Brazil. Announced last month, the deal was approved this week by antitrust regulator Cade.

Brasil TecPar does not rule out following suit. “Mergers can also add value to our operations. We have been talking to several peers.”

An IPO is also a possibility for Brasil TecPar. According to the COO, the outlook is starting to improve for the stock market and a window for an IPO may open in 2024.

ACQUISITIONS

For the time being, the 28-year-old company plans to follow its strategy of organic growth coupled with acquisitions of smaller ISPs.

This week, Brasil TecPar announced the acquisition of two more providers: DZ7 Internet from São Paulo state and Hi Telecom in Mato Grosso. The two add 27,000 customers to the company's base – 16,000 from DZ7 and 11,000 from Hi Telecom.

According to Melo, Brasil TecPar integrates a new ISP every 45 days. This year alone, eight acquisitions have been announced.

Overall, Brasil TecPar has made more than 50 acquisitions.

Since 2019, the process has accelerated, with around 40 acquisitions since then.

Melo said competition and costs will continue to be important obstacles for the sustainability of the business of smaller providers.

Aside from M&As, the company targets 10% growth in its organic base this year and 1bn-reais (US$204mn) in annual revenues.