Adviced an FTTH retail operator and consolidator in Brazil on the carve-out process of its access and network infrastructure assets

Scope of work

Supported our clients, a private equity fund owner of a major FTTH operator in Brazil, during the process of integrating +10 local operators into the holding company.  Following the integration of +6mn homes passed with FTTH within the operation, our client required support in the definition of strategic options for the carve-out of the access network and the creation of a 10-year business plan to assess the potential sale of the asset.

We conducted a detailed commercial analysis of the different markets and regions in Brazil where our client is present, including telecommunications service penetration, historical subscriber evolution, retail pricing trends, competitive assessment, technological dynamics, regulatory impacts and strategic positioning of our client vs. the competition.

We then provided a detailed analysis of the company’s assets and performance, including its growth strategy, operating and capital expenditures, and positioning against other national operators. The objective was to determine the business potential of the resulting entities of the carve-out: the InfraCo and ServiceCo. We proceed to modelled sensitivities and different business scenarios of how the take-up rate of InfraCo’s FTTH wholesale network would evolve, considering the actual network footprint, geographical analysis of competitors’ networks and the definition of an adjusted wholesale price to guarantee attractive margins to retail clients.

Following the success of the first phase of the project, our client requested support to execute the entire FTTH access network carve-out strategy and subsequent creation of the InfraCo (owner of the network) and the ServiceCo (owner of the customers, backbone and fibre aggregation networks). The process included the spin-off of the assets, definition of wholesale prices, structuring of the Master Service Agreement (MSA) between InfraCo and ServiceCo, future roll-out plan agreements, contractual conditions, the development of a commercial and technical vendor due diligence, management presentations and support in the search for potential buyers for InfraCo.

As a result of the support process, our client achieved the successful carve-out of the infrastructure and is in the process of negotiating with different infrastructure funds and wholesale operators for the potential acquisition of the InfraCo. The FTTH operator has changed its business model and, in the future, will have a financial partner to leverage business growth and network expansion.