Sao Paulo — Vero, a Brazilian telecom company that has asset management firm Vinci Partners as its largest shareholder, boasts a range of options for continued growth, CEO Fabiano Ferreira said in an interview with Bloomberg Línea. These options include mergers and acquisitions (M&A) as well as the possibility of going public.
“We’re setting up for an IPO opportunity, but going public is not all we are focusing on,” Ferreira said.
The company was founded in 2019 based on Vinci’s investment thesis for the Brazilian telecom sector. At that time, Vinci’s private equity arm, which focuses on alternative asset management, had acquired regional providers and consolidated them into Vero, which now operates in 420 cities. Vinci currently holds a 38.6% stake in the company, followed by Warburg Pincus (23.65%) and Invest Tech (7.56%), alongside other minority shareholders.
Vero’s operations span from fixed broadband to mobile and fixed-line telephony, as well as a pay-TV service. The company has around 1.9 million contracts in total, of which approximately 1.35 million are for broadband, across 420 cities in the Southeast, South, and Midwest regions.
Following its merger with Americanet, net revenues reached R$817 million (US$144.86 million) in the first half of the 2024, up 5% year-over-year, combining the results of the two companies in 2023.
Adjusted EBITDA, a measure of operating cash flow, grew 11% to R$425 million (US$75.36 million) over the same period. During the last 12 months, adjusted EBITDA reached R$850 million (US$150.66 million).
The average revenue per user (ARPU), a key metric for investors, hit a record high of R$109.35 (US$19.39) at the end of June, up 3.5% compared to the second quarter of 2023.
“In the second half of the year, we will accelerate our commercial activities and expand our portfolio of products and services,” Ferreira regarding the company’s plans for growth.
In a competitive market with giants like Telefônica Vivo (VIVT3), TIM (TIMS3), and Claro (AMX), Ferreira still sees room for exponential growth. “Brazil is a vast country. Today, we have three major operators, but there’s room for at least two more robust companies in the country.”
To get there, he believes the sector will continue to undergo significant consolidation, which has already begun. “We are the result of 47 transactions, and we will pursue new M&As,” he said.
The 47th transaction was the merger with Americanet, completed last December. According to Ferreira, the synergies are in “full swing.” “Our integration plan [with Americanet] includes over 1,800 initiatives, and we’ve already succeeded in about 75% of them. We can offer better prices because we operate on a single platform,” he explained.
“We have several M&As in the pipeline. There are more than 12,000 providers registered with Anatel today, and the opportunities are vast,” Ferreira added.
However, he noted that Vero won’t engage in deals at any cost. “We’re considering businesses with anywhere from 100,000 to over 300,000 customers. We’ll primarily evaluate locations where we don’t yet operate. We aim not only to increase our customer base but also to expand geographically.”
Going Public
Ferreira explained that the company has been preparing for a public offering since its inception. “In 2021, we thought this would happen, but due to the macroeconomic environment in Brazil and globally, there were no new entrants in this market,” he said.
Vero decided to remain a publicly registered company in category A of the CVM (Brazilian Securities Commission). “We have the same obligations as any other publicly traded company; we communicate with investors quarterly,” he explained.
In addition to the major telecom companies mentioned earlier, three smaller operators are listed on Brazil’s B3 stock exchange: Brisanet (BRIT3), Desktop (DESK3), and Unifique (FIQE3). “We’ve been dreaming about an IPO for some time. At some point, we will go public in Brazil,” Ferreira said.
He added that Vero isn’t limited to an IPO as a means of raising capital.
“We’re also working on issuing debt. We have the advantage of using incentivized debentures, which are an excellent tool for financing growth.”
The company is also considering bringing in a new partner. “That’s something we haven’t ruled out. From time to time, there are discussions about capitalizing the company with resources from a new investor,” Ferreira said.
In his view, Brazil is beginning to be seen again as an investment destination, particularly by foreign investors. For Ferreira, the telecom sector combines technology and infrastructure, which makes it a top priority for investors.
“A well-positioned company like Vero is attractive. We want to bring in a good investor who will accelerate not only with capital but also, ideally, with expertise. That would be the ideal investor.”
Satellite Internet
Ferreira also believes that the arrival of technologies like satellite internet, offered by Elon Musk’s Starlink, should complement the existing offerings in Brazil.
“The country has the potential to connect many more customers via fiber; we could double the number of subscribers in the market. Satellite is a complementary tool,” he said. “Brazil is different from other countries; there’s still a lot of room for growth here.”