Brazil's Brisanet slashing 2023 capex

Brisanet, Brazil’s second largest internet service provider, plans to significantly cut its capital expenditures in 2023 as economic woes and a fiber slowdown take their toll.

The company targets 700mn reais (US$137mn) in investments for the full year, compared to 1.34bn reais in 2021 and 1.36bn reais between January and September 2022. Final capex figures for last year have not yet been disclosed.

“Given the lower expected growth for HPs [homes-passed] in 2023 and the growth of HCs [homes-connected, or FTTH clients] at the same level as 2022, the company expects to invest around 350mn reais in FTTH in 2023 and another 350mm reais in 5G, including backbone,” Brisanet said in an operations report.

The capex target puts Brisanet at spending levels closer to its main competitors. Alloha Fibra, the holding of ISPs controlled by Brazilian investment fund EB Capital and Brazil's largest ISP, aims to invest over 800mn reais this year.

Despite the capex cut, Brisanet said it has a “comfortable financial situation and capital structure” in a scenario of “high interest rates and lower economic growth.”

The firm has not yet reported its Q4 earnings. In its operational report for December, however, Brisanet said it reached 1.10mn clients and 6.11mn homes-passed in 154 cities of the nine states of the northeastern region where it operates.

During the month, Brisanet added 45,607 homes-passed and gained 20,531 clients. The outlook for 2023 is for 1mn homes-passed and customer base growth at an average of around 21,000 per month.

Franchise unit Agility Telecom had 216,000 customers and 995,000 homes passed at year-end.

“The Brazilian economic scenario, especially in the region where we operate, remains challenging. High inflation and the pricing strategy adopted by competitors continue to exert pressure on the telecommunications market,” Brisanet said.

According to telecoms regulator Anatel, the total fiber base declined in November for the first time in four years as ISPs, which used to be the main force driving the segment, struggle to convert homes-passed into clients and grapple with greater churn.

Fiber represented 69.1%, or 30.4mn, of all fixed broadband connections in the country in November, compared to 30.6mn at end-October and 25.3mn at end-November 2021. Brisanet had 3.5% of the fiber broadband market as of November, according to Anatel.

Brisanet is the only company licensed to operate in the 2.3GHz spectrum band in the northeast of Brazil. 

The firm, which is building its own 5G mobile sites from scratch and not resorting to tower companies, had already postponed the initial rollout of 5G from March this year to the second quarter.

Huawei was hired by Brisanet as its core equipment supplier for the 5G networks.