Mid-sized internet providers revamp to break through competitive market

Bnamericas Published: Thursday, November 17, 2022
Mid-sized internet providers revamp to break through competitive market

Mid-sized Brazilian internet service providers (ISPs) are reshuffling their operational structures and revamping their strategies to sustain growth in a highly competitive market under challenging macroeconomic conditions.

Among them, Alares is centralizing operations and starting a new brand, replacing Grupo Conexão, under which it previously operated.

The firm is controlled by US fund Grain Management since June 2021 and reports 13,700km of fiber deployed, 1.7mn homes passed, 506,000 subscribers and 2,000 employees, with operations in 100 cities of six Brazilian states.

“We position ourselves as protagonists in the market. As consolidators. Obviously, we will analyze opportunities that make sense within our strategy,” Alares CEO Denis Ferreira told BNamericas.

Conexão/Alares was formed after the acquisition of 18 ISPs, in a process that started in 2015.

Over the past 12 months, the company also purchased providers IP3 Tecnologia, NHA Chica Provedor de Internet, Resendenet, Ntcom Telecomunicações, Netvga Serviços em Telecomunicações and Telecommunications Sapucaí Telecom. 

All brands will cease to exist by the end of the first quarter of 2023 and be fully integrated into Alares.

The company is also executing several initiatives to accelerate network evolution, simplify and digitize processes and products, and implement best business practices, Ferreira said.

Grupo Alares posted a net loss of 45mn reais (US$8.36mn) in Q3, double the loss in the same period of 2021. Revenues were up 12.5%, to 129mn reais, while the number of subscribers grew by 46,000 to 506,000.

The group attributed the loss to an increase in financial expenses, due to consultants hired for its acquisitions, as well as network expansion investments. 

Ferreira said Alares has a solid cash structure and is well-funded by Grain Management. The US fund reports over US$7bn in assets under management and 16 ICT companies in its portfolio, with Alares being the sole in Latin America.

Alares was also recently cleared by the communications ministry to issue infrastructure bonds, so-called debentures, worth 550mn reais. The goal now is to make investments profitable.

“We don't have an accelerated pace of homes passed. We want to accelerate the occupation [take up] rate of our network and monetize the investment we had already made,” said Ferreira. “We are having a pretty diligent strategy.”


Alares is a medium-sized ISP in Brazil, distant from market leaders, but way ahead of small providers that operate in only one or two cities.

Around 16,000 formally registered ISPs are estimated to operate throughout Brazil. Of these, only a few hundred would actually be active, with operations and a minimal customer service structure.

These players have leveraged the expansion of fixed broadband, mainly via fiber, in recent years. 

According to regulator Anatel, ISPs and local providers led the fixed broadband market with a combined share of 35.7% in September, and 43.5% in fiber broadband specifically.

The market is also prone to consolidation, which occurred mainly among mid-sized and small ISPs.

According to ISP association Abranet, there were at least 80 such transactions in 2021, making mid-sized ISPs bigger and attractive for acquisition by larger providers and funds.

Felipe Hildebrand, partner of communications, media and technology at Oliver Wyman consultancy, told BNamericas that “this market will remain active next year in dealmaking. And we will also see some better structured ISPs launching mobile services, such as Brisanet [Brazil’s leading ISP, which bought licenses in last year’s 5G auction].”

He added, “it will be interesting to analyze this movement. The fact is that there are still some pretty immature ISPs out there in the market.”

More recently,  280 ISPs, with combined 5mn subscribers in 1,400 localities, jointly entered the mobile market. This group, called ISPs do Brasil, signed a contract with telecoms company Surf Telecom to create a nationwide mobile virtual operator.

The agreement provides for 3G, 4G and even 5G coverage, since the networks used will be those of Surf (in São Paulo) and TIM, with which Surf has a nationwide agreement for spectrum use and RAN sharing.

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