Those who live or visit municipalities outside of large centers have already become accustomed to some broadband internet providers that are not Vivo, Tim, Hey e Of course. Brands like Giga+, Vero, Algar, Brisanet e Desktop They are more common in cities with lower population density. And clearly, this is no coincidence.
Together, these independent providers, called ISPs in the market, they form a silent majority in the supply of broadband internet in the country. Currently, 65% of the fiber internet offered in Brazil comes from these companies. Most recent data from the National Telecommunications Agency (Anatel) show that there are more than 7500 fiber optic providers in Brazil and, of this total, only 298 companies (3.9%) have more than 10 thousand customers.
It is a market that, sooner or later, will need to be consolidated by larger companies until there are a few large groups left in this market. This is the bet Alloha Fibrathe largest independent fiber optic internet provider on the market, which is back to acquisitions and with almost R$800 million in cash to invest.
The company, owner of the brand Giga+recently completed a major corporate reorganization that took more than a year to complete. But it had become inevitable for the company’s future plans, he says Lourival LuzCEO of the company since July last year.
Luz, executive who led the BRF for more than three years, he arrived at the fiber optic internet provider in April 2023, then as president of the board, with the mission of integrating the more than 20 companies acquired by Alloha since 2018. A tangle of 21 CNPJs, 83 systems and 9 brands became three CNPJs, 17 systems and bet on just one commercial brand, Giga+.
“That was the first mandate given by the council: to clean up the house so it could grow again”, says Luz, in an interview with InvestNews.
Consolidation
The wave of ISPs in Brazil was triggered in 2018, when Anatel changed the rules for Small Providers (PPP), companies with up to 5% share in the national market, as is the case with Alloha. This segment of companies has obtained some advantages over large operators – for example, the tax framework and greater flexibility in customer service services.
This lower barrier to entry allowed investment funds to start looking at the service, which combines two strengths that shine in the eyes of investors: recurring revenue and attractive margins (around 50%). On another front, there was no interest from large telcos in investing in areas with lower population density, leaving a free market for companies with a more regional profile.
This entire environment provides an opportunity for wealthy companies to continue investing in the segment. Alloha itself returned to shopping at the end of October, with the acquisition of the Maranhão company Atex, for R$73 million. The acquisition added another 63 thousand customers to the Giga+ portfolio and with the structure to serve up to 393 thousand homes in the State.
“It’s a natural movement in which the super small is bought by the small, which, in turn, will be bought by the medium… It was like this everywhere in the world”, recalls Luz. With a base of 1.6 million customers, Alloha keeps an eye on providers that have at least 25 thousand users.
To assess whether or not it is worth buying a particular company, Alloha takes into account complementarity in terms of region of operation and the level of competition in that area, in addition to the quality of the target company’s network. “It’s more worthwhile for us to do it from scratch than to buy a company that has very old technology,” explains the executive.
Restructuring
The change recently promoted by Lourival Luz involved the creation of a holding company to organize the corporate participation of the managers eB Capital e Neo Investimentoswhich form the controlling block, with minority shareholders who held shares in companies purchased by Alloha.
From this, eB Capital and Neo had a 70.2% stake in the holding, with 29.8% remaining for other shareholders. With the changes, the company became lighter and now has a simpler structure to fully integrate a new acquired company within six months, accelerating financial gains with operational efficiency, the so-called “synergies”.
“It was a great process of simplifying the structure, which allowed us to have a more structured governance aligned with the practices of the Novo Mercado (of B3)”, adds the CEO, also remembering that, recently, Alloha obtained an “A” registration in the Securities and Exchange Commission (CVM), which allows it to carry out an initial public offering of shares (IPO, in English), if it is interested.
Between January and September this year, under Luz’s management, the company’s net profit grew 48.9%, from R$30.5 million to R$45.4 million. During this period, the owner of Giga+ had revenues of R$1.25 billion, growth of 62.1% compared to the same period of the previous year (R$774 million).
Busy market
Although there are many opportunities at the base, it is the top of the ISP market pyramid that is most heated. In July last year, the Vero ea America.netcompanies controlled by managers Vinci Partners e Warburg Pincusrespectively, made a merger that created the fifth largest fiber provider in the country.
More recently, the Vivoleader in the fiber market, confirmed that it is in talks with Desktopnumber 6 in the country, for a possible acquisition.
Alloha itself recently hired the UBS BB to study market opportunities. Rumors even surfaced that this hiring was intended to facilitate the sale of the company – in its entirety or a stake. But Luz denied that the company is for sale.
“We hired UBS as our advisor. The market is changing and the investment banks themselves help us study all scenarios”, says Lourival Luz. “Our objective is to grow, and this can be in different ways: through partnership, merger or IPO – but nothing has been decided yet. It’s market conditions that will tell us”, he reinforces.
Alloha is controlled by investment funds private equityand Lourival Luz remembers that it is the nature of this type of investment that the managers, in this case eB Capital and Neo, will sell their shares in the business at some point. “But this is not our decision. Our role is to deliver results so that, when this happens, we have an even better company.”
Lourival Luz arrived at Alloha at the invitation of the former minister Pedro Parenteone of the partners of eB Capital, a house that still has the mega-investor Marcelo Claure, Eduardo Sirotsky Melzer e Luciana Antonini Ribeiro. Luz and Parente repeat the double they did at BRF between 2019 and 2022, in which Lourival was the CEO and Pedro, the chairman of the board of directors. “Pedro’s experience helps a lot. The CEO’s position is lonely – and he has experienced this many times –, so it gives us peace of mind to make the best decision.”
