Vivo, owned by Telefónica Brazil, analyzes the acquisition of fiber assets in the country | DF SOUTH

The Spanish group Telefónica has been intensifying a series of sales of towers and participation in its fiber optic networks through the subsidiaries it owns in European and Latin American countries. In the Brazilian market, where Telefônica Brasil, owner of Vivo, controls, the fiber business tends to go in the opposite direction. Instead of selling, the operator is willing to buy the fiber assets that come their way.

“The natural tendency is to reduce network overlap and we will see how it will be done,” Christian Gebara, CEO of Telefônica Brasil, told Valor. The CEO agrees with the forecast of industry experts that the expansion of fiber optic infrastructure will come to an end among the largest operators. But for Gebara, this is likely to happen in the short term. This means that the mergers and acquisitions that have been shaking the more than 10,000 small Internet access providers are already beginning to “knock on the door” of the big ones. And Telefónica is not on the side of the sale, warns the executive.

“Our strategy is well defined. The consolidation opportunity for us has to be very positive and cannot overlap with my network.” Gebara said of potential acquisition targets. “I can’t speak for other players, but I think some of them may be interested (in selling), because competing with Vivo, with a network of this size, with a channel and a brand with the strength we have, with the possibility of convergence, with the entire portfolio of digital services, may not be easy”.

The reconversion of Telefónica with new partners, fiber optics and without asset sales in the region

In the global market, the dominant operators first separated the services from the infrastructure, creating independent or neutral networks, totally isonomic, to operate wholesale. Then they attracted investors.

“Each company in the group has a fiber strategy, Brazil’s is different,” explained Gebara. “If you look today at the ‘table’ of 2024, one of our networks reaching 29 million homes, 22 million will be Vivo’s own network and the rest through the neutral network. So much of our network will continue. Right now, the plan is for it to be 100% owned by Vivo.”

Operation in Brazil

By separating its infrastructure and creating FiBrasil, Telefónica secured its presence in the fiber market on different fronts. It invests through FiBrasil, a partnership between Telefónica Brazil and Telefónica Infra, from Spain, with 25% each; and the Canadian fund CDPQ, with 50%. Plus, invest directly with Vivo. Finally, it has a partnership with American Tower in Minas Gerais.

Of the total homes where Telefónica has already installed fiber to be contracted by providers and sell the FTTH service (fiber to the home) to consumers, 6.4 million are operations through FiBrasil and the rest through Vivo, while that the agreement with American Tower includes 1 million homes.

Leader in its partnerships, Vivo determines the expansion strategy and still has a period of exclusivity before the network capacity is sold to competitors. “It’s hard to see an operator like ours having the control that we have,” Gebara said, comparing his strategy not only to local rivals but also to his peers in the group.

Local competition is also accelerating. IHS is a partner of TIM Brasil in the neutral network company I-Systems. Oi sold control of its fiber asset, V.tal, to funds from BTG Pactual and GlobeNet Cabos Submarinos. Compared to the other incumbents, Grupo Claro Brasil is the one that is furthest behind in the deployment of fiber, in addition to not having admitted partners so far.

Selling a portion of the network was a way for the companies to raise the funds needed for heavy investments in expanding fiber and 5G networks, as well as to reduce high debts.

In the results report for January to September 2022, published on Thursday, the Telefónica group reported a net debt of 28.9 billion euros. In Brazil, net debt was 13.5 billion reais, including the leasing effect.

When presenting the results of the Vivo group in a conference call for investors last Friday, the chief operating officer, Ángel Vilá, highlighted an “excellent set of results, growing double digits in accesses and main financial indicators”. He added: “In Brazil, our unmatched operating and financial performance has helped us strengthen our leadership position in the market.”

The plans of the Mexican América Móvil to grow in Brazil, its new largest market

Vivo, owned by Telefónica Brazil, analyzes the acquisition of fiber assets in the country | DF SOUTH