Leading Brazilian ISPs begin 2023 in strong M&A mode

Two of Brazil’s largest internet service providers (ISPs) – Unifique and Vero Internet – have started 2023 in strong M&A mode.

Their three recent deals came after the acquisition by AmericaNet of Link Mais Internet (LK Internet), which was unveiled at the end of November.

"There's expectation that M&A operations will remain very active throughout 2023. Some valuations will tend to be adjusted, though, due to the current scenario of higher interest rates," Luiz Henrique Barbosa da Silva, president of ISP association TelComp, told BNamericas.

One of the biggest ISPs in the country’s south, Unifique was involved in two of the three acquisitions in question.

The company, which at the end of December unveiled the purchase of ViaWebRS and its subsidiaries for 76.9mn reais (US$14.1mn), said on Tuesday that it was buying Tknet Telecom.

Both of the acquired firms operate in Rio Grande do Sul, a state where Unifique is betting strongly on boosting its market share and where competition is growing increasingly fierce.

Tknet provides internet services to corporate customers and government agencies, mostly via fiber networks. According to Unifique, Tknet has an enterprise value of 1.5mn reais.

As for ViaWebRS, the purchase agreement contains a non-competition clause for a five-year period. According to sector regulator Anatel, ViaWebRS had around 25,400 clients at the end of October, 81.9% of which were in the fiber segment.

In 2018-21, Unifique pursued an aggressive acquisition strategy with 27 acquisitions. 

The company posted a 40.1% year-on-year profit increase in the third quarter, to 31.1mn reais.

Unifique had 600,325 accesses at the end of September, up 41.3% y-o-y, and 2.29mn homes passed with fiber, up 69%. 

The company commanded 4.7% of Rio Grande do Sul’s fixed broadband market at end-October (6.3% of the fiber segment), while being number one in Santa Catarina state with a 18.7% market share (24.9% fiber).

It is planning to launch mobile services this month after acquiring frequencies in the 5G auction in 2021, as CFO José Wilson Junior told investors on the company’s Q3 earnings call. 

According to the executive, this operation will be based on roaming and antenna-sharing agreements. 

VERO INTERNET

Last month saw Vero Internet purchase Fixtell to enter the ISP market in Brazil’s midwest region.

Fixtell is based in Goiás state and the deal’s price tag was not disclosed. 

With its headquarters in Minas Gerais state, Vero sees the acquisition generating at least 50mn reais in extra operating revenue this year. 

Vero projects that Fixtell will have around 36,000 customers upon completion of the deal, which is expected to occur before the end of June.

At end-October, Vero had 696,000 fixed broadband clients and 27,500 in the fixed telephony segment.

Founded in 2010, Fixtell operates in the federal district and the Goiás municipalities of Nova Gama, Valparaíso and Luziânia.

IT Investimentos was the financial advisor to Fixtell in the sale to Vero.