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Telecom in Brazil Follow the Money Report

Opportunities for Change

The Brazilian telecommunications landscape in 2024 and early 2025 is characterized by significant investment flowing into specific areas of the value chain, creating distinct opportunities for change, transformation, and growth. These investments, driven by Mergers and Acquisitions (M&A), Corporate Venture Capital (CVC), private equity, and strategic corporate initiatives, are reshaping infrastructure, competitive dynamics, and service offerings.

1. Modernization and Expansion of Core Network Infrastructure

A primary focus of investment is the enhancement and build-out of next-generation network infrastructure, particularly fiber optics and 5G technology.

  • Neutral Wholesale Fiber Networks: This is arguably one of the most transformative areas receiving substantial investment. The formation and rapid expansion of V.tal, largely from Oi's divested fiber assets and backed by Grupo Werthein, BTG Pactual, and other investors, epitomizes this shift. V.tal operates as a wholesale-only neutral fiber network, offering open access to its extensive infrastructure. This model is attracting significant capital, as seen in V.tal's ongoing investments to expand its network, which supports numerous retail service providers, including major operators and regional ISPs. This facilitates a more rapid and widespread deployment of fiber by lowering entry barriers for service providers who can lease capacity instead of undertaking costly self-builds. Similarly, FiBrasil, a joint venture between Telefônica Brasil (Vivo) and the Canadian fund CDPQ, represents continued investment in shared fiber infrastructure. These neutral networks are fundamentally changing the Network and Connectivity layers by promoting infrastructure unbundling and fostering competition in the retail broadband market.

  • Regional ISP Fiber Expansion and Consolidation: Regional Internet Service Providers (ISPs) have become key drivers of fiber-to-the-home (FTTH) penetration, often backed by private equity. Companies like Alares (supported by Grain Management), which acquired Azza Telecom and Webby, and Brasil TecPar (receiving a US$ 300 million commitment from Macquarie Capital for acquisitions and growth), which acquired Nova Telecom and Sempre Telecom, are actively consolidating the market. Vero Internet (backed by Vinci Partners and Warburg Pincus) is also pursuing acquisitions. These investments are directed towards expanding their fiber footprints, increasing subscriber bases, and strengthening their competitive stance against national incumbents, particularly in underserved or specific regional markets. This directly impacts the Connectivity, Network, and Customer layers by increasing infrastructure density and consumer choice.

  • 5G Network Deployment: The rollout of 5G technology is another critical area of investment. Specialized tower companies like Highline (acquiring 8,000 towers from Oi) and QMC Telecom International (securing $115 million in credit facilities for 5G infrastructure investment) are consolidating passive infrastructure. This allows Mobile Network Operators (MNOs) to focus their capital on active network equipment (RAN) and accelerate 5G deployment and densification. Government funding, such as the Funttel fund (R$ 347 million disbursed in 2024), also supports R&D in 5G, influencing the Equipment & Software and Network layers.

  • Satellite Broadband Expansion: The emergence of Low Earth Orbit (LEO) satellite internet providers, notably Starlink, represents a privately funded opportunity to extend broadband connectivity to remote and geographically challenging areas. While investment figures are often global, the impact on Brazil provides an alternative connectivity solution, primarily affecting the Connectivity and Customer layers by bypassing traditional terrestrial infrastructure limitations.

2. Diversification into New Digital Services and Business Models

Telecommunication companies, particularly incumbents, are actively investing to diversify their revenue streams beyond traditional connectivity, moving into higher-value digital services.

  • Corporate Venture Capital for Digital Ecosystems: Vivo (Telefônica Brasil) is a prominent example, utilizing its CVC arms, Wayra Brasil and Vivo Ventures, to invest in startups across various sectors like education, energy, health, financial services (fintechs), smart home technologies, and entertainment. In 2024, these collaborations resulted in R$ 130 million in service contracts for Vivo. This strategy aims to generate new revenue, enhance operational efficiency, and enrich the customer experience by integrating innovative solutions. These investments primarily impact the Application, Navigation & Middleware, and Customer layers by fostering new platforms and integrated services. Further investments in fintechs are planned for 2025.

  • Strategic Acquisitions for B2B and Cloud Capabilities: Operators are acquiring companies to bolster their capabilities in high-growth B2B markets. Vivo's acquisition of IPNET, a key integrator of Google Cloud services, in late 2024 is a clear example. This move is designed to strengthen Vivo's position in the cloud solutions market, expanding its service portfolio for business customers and impacting the Application and Business Customer segments.

  • Growth of Mobile Virtual Network Operators (MVNOs): MVNOs like Surf, Datora, NLT, and Telecall, along with mobile ventures from regional players like Brisanet, are entering the market by leasing capacity from MNOs. While direct capital investment in underlying infrastructure is not their model, their existence represents an opportunity for differentiated service offerings targeting niche markets (e.g., M2M/IoT) or specific customer segments, thereby increasing competition and choice in the mobile market (Connectivity and Customer layers).

3. Restructuring and Consolidation of Market Players

M&A activity continues to reshape the competitive landscape, driven by strategic investments to achieve scale and efficiency.

  • Mobile Market Consolidation: The sale of Oi's mobile operations to Vivo, Claro, and TIM, though a process with roots in previous years, continued its integration phase. This M&A, funded by the acquiring trio, has fundamentally consolidated the mobile market, impacting competition and service offerings for millions of customers.

  • Ongoing Regional ISP Consolidation: As mentioned earlier, private equity-backed M&A among regional ISPs is a significant trend, leading to fewer, but larger and more robust, regional competitors. This investment in consolidation is an opportunity for these players to achieve economies of scale and better compete with national operators.

4. Fostering Technological Innovation through R&D

Investment in research and development remains crucial for the long-term evolution of the telecom sector.

  • Government and Institutional Funding for R&D: The Funttel fund, administered by the Ministry of Communications and managed by entities like Finep and BNDES, has invested R$ 4.8 billion historically, with significant disbursements for technological research and innovation in areas like cybersecurity, 5G, and IoT. This funding supports the development of new technologies and solutions, impacting the Equipment & Software and Network layers and fostering a more advanced telecom industry.

These investment-driven opportunities indicate a dynamic period for the Brazilian telecommunications sector, with significant changes occurring in how networks are built and shared, how services are delivered and diversified, and how market players compete and evolve.

Key Findings

The analysis of M&A, investment, and new entrant activities reveals several key opportunities for change in the Brazilian telecom value chain that are actively receiving investment:

Opportunity for Change Key Investment Drivers/Mechanisms Impacted Value Chain Layer(s) Primarily
Development & Expansion of Neutral Wholesale Fiber Networks M&A (e.g., Oi's asset sales to V.tal), Private Equity (e.g., V.tal backers), Strategic JVs (e.g., FiBrasil) Network, Connectivity, Competition, Investment Flows
Growth and Consolidation of Regional Internet Service Providers (ISPs) Private Equity (e.g., Grain Management, Macquarie Capital, Vinci, Warburg Pincus), M&A (e.g., Alares, Brasil TecPar) Connectivity, Network, Customers, Competition
5G Network Infrastructure Rollout and Densification Towerco Investments (e.g., QMC, Highline), MNO Capital Expenditures, Government R&D Funding (Funttel) Network, Investment Flows
Diversification into Advanced Digital & B2B Services Corporate Venture Capital (e.g., Vivo's Wayra/Vivo Ventures), Strategic Acquisitions (e.g., Vivo acquiring IPNET) Application, Navigation & Middleware, Customers, Business Customers
Expansion of Satellite Broadband Connectivity Private Investment by Global Providers (e.g., Starlink) Connectivity, Customers
Fostering Homegrown Technological Innovation Government Funding for R&D (e.g., Funttel) Equipment & Software, Network, Innovation
Mobile Market Restructuring & Consolidation Strategic M&A by Major Operators (e.g., Vivo, Claro, TIM acquiring Oi Mobile) Connectivity, Customers, Competition

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