Alloha Fibra, previously EB Fibra, has reclaimed the title of being the “largest internet service provider in Brazil” in terms of subscribers and network size considering all seven ISPs in its portfolio combined.
Part of the investment group EB Capital, the fiber company rebranded to better reflect its market positioning and appointed Alexandre Mosche to lead the operation.
Its main focus has not changed, which remains the consolidation of Brazilian ISPs and the expansion of fiber broadband in the country. The group expects to end the year with some 6mn homes-passed with fiber leveraged on its 104,000km network. An IPO is also on its radar.
Demonstrating that appetite for ISPs is big, MOB Telecom, one of Alloha's ISPs and the “hub” of the group’s operations in northeast Brazil, announced that it is studying at least six ISPs for acquisition.
The company is also looking into 5G services as a way to complement its offerings.
In this interview, Alexandre Mosche (pictured) and Felipe Matsunaga, CEO and CFO of the company, respectively, talk about the company's plans, consolidation, supply chain bottlnecks and 5G, among other topics.
Mosche: The expression, with an extra ‘l’ than the original Hawaiian greeting, has a lot to do with connection, which is what we're doing through optical fiber and everything that the internet represents in the regions where we operate.
But the decision to rebrand EB Fibra as Alloha also has to do with creating a specific identity for the holding company that groups all these internet service providers, while keeping the ISPs' brands at the forefront, which are very strong with their customers.
BNamericas: Does the rebrand also have to do with a business diversification strategy encompassing mobile with 5G, for example, going beyond the fixed business?
Mosche: Whoever is in our company today must have the ambition to do something lasting, big. When you consider that from a long-term perspective, it opens up lots of opportunities for us on how to do it.
Right now, our objective and priority is to integrate the networks of companies that we’ve already acquired. This is important to provide us with unified visibility of our business.
We want to continue growing in fiber, both through organic growth and inorganic growth. As for 5G, we're following what’s taking place, we're looking at the auction process. We have nothing to announce at the moment, but let's say that we could go for it now or later.
At present we have one of the largest proprietary networks in the country. It is either the third or fourth largest fiber network in Brazil. And we know that we'll be able to monetize that asset in different ways, and 5G is also a way of doing that.
Why? Because whoever opts for 5G will need a fixed connection to deliver it. Our network will serve these companies [the tender winners]. Ultimately, fiber is needed to terminate the 5G connection.
BNamericas: How is the integration of the ISPs you have acquired to date going and what is the strategy of having an ISP as a ‘hub’ for each region in the country?
Mosche: We believe in this concept of regional hubs, as it allows us to have leadership very close to these companies and to define a business strategy not only looking at the particular reality of specific ISPs, but at the broader challenge in the region where they operate.
The Alloha holding allows us to focus on how to disseminate best practices and do things in an integrated manner. Because doing things in an integrated way means we're much more efficient. For example, in terms of procurement, of legal issues, of acquisition investment decisions; all of these things performed in a unified manner by the holding generate a lot of efficiency.
At the same time, it helps us to organize the M&A strategy. We can incorporate a smaller company that we might acquire into the structure of one of these hub ISPs, such as MOB Telecom in the northeast.
BNamericas: How are you dealing with the competitive scenario, which is increasingly fierce, including from the perspective of ISP acquisitions? Are big ISPs like [northeast-based] Brisanet, which has become the country's third largest fiber broadband player in terms of subscriber numbers, an inorganic threat?
Matsunaga: The biggest company by subscriber numbers today is Alloha. We’re already close to 1mn subscribers. But it's something that doesn't show up in the stats because they’re reported separately. But when we consider all the ISPS we have, all their subscribers, we’re the third biggest fiber player, having outpaced Brisanet by around 100,000 subscribers.
BNamericas: So do you intend to change the way that operating figures are released by [regulator] Anatel, for example, to reflect your customer base as a whole?
Mosche: I don't have more details just now, it's something we still need to work on. But the fact is that we should end December with a total of more than 1m subscribers between the group's companies, and 5.7-6.0mn homes-passed [premises connected with fiber, though not necessarily customers].
Returning to your question about competition, the fact that we have national coverage as a group makes us able to look at very different opportunities and from a very different perspective. It’s obvious that there are other companies, such as Brisanet, among others, all conducting moves to raise funds, that can somehow compete with us in the inorganic aspect of the business.
But our national coverage, and the structure of the hubs allows us to make choices [of acquisitions] in a way that’s very close and fine-tuned to where things are happening; looking at opportunities not only in the northeast of Brazil, but in the south, southeast, etc. Our hub ISPs work as a competitive advantage for that purpose .Our size, our ability to leverage resources gives us the advantage of working on all of this more efficiently.
Another important thing is that the fact that we have more than 100,000km of network in the country, giving us the possibility of better serving the B2B segment, which is another business avenue we’re pursuing and want to expand.
BNamericas: Talking about resources, how is the company dealing with the lack of components, the high freight costs and the overall disruptions in the supply chain? And who are your suppliers for optical networks and equipment such as transponders?
Mosche: It’s certainly a serious problem. The FX effect is also weighing on things too. But I prefer to like at the glass half full.
When we go to a distributor, vendor or commercial partner and say 'look, our planning has this rate of growth, with this base of subscribers’, it makes it easier. That's what we're experiencing. The benefit of doing it all together.
Matsunaga: The shipping problem is almost chronic. All vendors come to us with the same story. Everyone who comes to talk to us cries a river about the price of containers, which has gone up a lot.
But we’ve gained such a large scale that we enter into RFPs [requests for proposal] for equipment and components with the status of large carriers. We're talking about transponders, cables, ONUs [optical network units].
Although the price has gone up, freight has gone up, when you buy in large volumes you go up in the scale of the vendor.
With respect to vendors, specifically, we work only with tier one companies; Huawei, Nokia, ZTE, and so on. We always go with the hype of technology, with what's new. And it's not just because we like it. It's because we know that economically you will have maintenance problems in the future, maintenance capex, if you don't have the best technology employed to serve your networks.
Many providers add technology that isn’t so advanced, but they’ll face problems in maintenance capex in three or four years’ time.
BNamericas: You see more sense when working with global suppliers, even if it that eventually means higher costs in dollar terms than working with local suppliers, albeit good ones, to avoid future capex-related losses. Is that it? By the way, Brisanet, for example, closed a deal with Brazil’s Padtec.
Matsunaga: Not to leave Brazil out of the equation, we like Brazilian companies. We have Padtec in our network. There are very good guys in Brazil. Padtec is one of them, it works very well. But we don't just have Padtec. We have Nokia, Huawei, Juniper, among others.
Whatever we can buy from Brazil, we’ll do, not least because there’s a tax incentive to do this, especially when you raise funds via [research and financing agency] Finep.
But the fact is that we need volume and prices. And we also try not to do everything 100% with one vendor. We diversify, use a pool of vendors.
BNamericas: Open RAN technology is all about vendor diversification. Is that on Alloha’s radar?
Matsunaga: We are going use to open RAN. We’ve discussed it a lot internally and even with the vendors that provide us with network equipment, but there are some steps that still need to be taken. From the internet service provider's point of view, in theory, you can use an ONT [optical network terminal] one way, an ONU [optical network unit] another, and so on. There’s no prohibition on that. But we’re at an intermediate stage of this process. We have the pressure to have a single, unique [supply] chain and the pressure to open up this chain to other suppliers.
We want to make use of open RAN. But we still need to go through a number of things so that we can do it.
Mosche: We’re very concerned internally about how we integrate what we have today, about the acquisitions we make, but also about the [technological] decisions we make for the future. We’ve given great attention to this area of networks and open RAN.
BNamericas: In general, what are your perspectives for 2022 and how much do you intend to invest in the next cycle?
Mosche: We can't talk about values yet, because we’re actually working on those figures right now. But we want to continue growing strongly. Some of our operations have grown organically over 170% this past year on a year-on-year basis.
In short, we want to be the largest independent fiber optic provider in the country. This growth will have an organic and inorganic focus, while we will continue to be concerned about the sustainability of the business.
Matsunaga: We’ll keep growing at triple digits in some of the companies, double digits in others.
Our theory is focused on growth, on the market, because there’s room for that, and there are a lot of opportunities for our fiber network with what’s coming.
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