Telefónica ups Brazil investments in Q1 fueled by 5G, fiber

Telefônica Brasil upped its investments 11.2% year-on-year in the first quarter to 1.87bn reais (US$367mn), increasing its capex-to-revenue ratio to 13.8%.

In the same quarter last year, the telco’s investments had fallen 10.3% year-on-year and in 4Q23 they fell 7.8%.

The Telefónica group unit expects capex-to-revenue to gradually converge to around 12%.

“Our plan is to reduce capex intensity. We are anticipating investments to maximize return on this capex for the year. The new digital businesses are less capex-intensive, which helps our guidance,” CFO David Melcon told investors in a results call in reference to the telco’s bets on content, home-connected and financial services, among others.

Competitor TIM also said this week that it will “moderate” investments for the rest of 2024 after a stronger-than-expected Q1, in order to reach its annual guidance.

Like Telefônica, TIM's executives said that higher capex in the period was aimed at anticipating future revenues and synergies.

In the case of Telefônica, Q1 capex was directed mostly to the mobile network, leading 5G coverage to reach 181 cities, and to the expansion of its fiber network, which ended March with 26.8mn homes passed and 6.3mn customers – up 10% and 12.3% year-on-year, respectively.

CEO Christian Gebara said the company is on track to comfortably reach the target of 29mn homes passed by year-end.

The biggest growth in the company's investments was in the technology, information and others category – up 30.1% to 214mn reais.

The jump is likely related to the company's digitization strategy, both in the back-office and front-end, including the offering of further digital and content services and the launch of new technologies.

In the call, Gebara reiterated that Telefônica aims to put increasingly more digital services bundled together with fiber.

Overall, Telefónica's Brazil subsidiary posted 13.5bn reais in net revenues, up 6.5% year-on-year, with mobile service revenues increasing 9.3% and FTTH revenue 14.7%.

The company, which is the telco with the biggest customer base in Brazil, ended March with 113mn accesses, of which 100mn were mobile ones.

RIO GRANDE DO SUL FLOODS

In Rio Grande do Sul state, where torrential rains led to major floods and wreaked havoc on local infrastructure in recent days, the company reported 30 cities currently without service.

An additional 75 municipalities were facing partial outages.

The telco is supporting customers to stay connected while it seeks to restore all its network, offering 10GB of free mobile data to prepaid and control plan customers in the affected areas.