Over the past year, Highline changed ownership, sealed seven deals and shifted its focus from tower company to all-encompassing digital provider. While Brazil is in turmoil and the pandemic still in expansion, Highline’s management are literally reshaping the market from their home – and some joke that if this continues, they will conquer Brazil as a whole! In this exclusive interview, Fernando Viotti, CEO of Highline, shares his insightful perspective on the future of the company, its shift in focus and what lies ahead for the Brazilian market.
TowerXchange: Please share some details about the many changes that occurred to Highline over the past year.
Fernando Viotti, CEO, Highline: When we decided to partner with Digital Colony, we aimed at pursuing big goals. For the past seven years, we had been building Highline and completed a cycle with Patria, our previous investor. We completed the sale of assets to SBA Communications and then sold the company to Digital Colony. At that point, we knew we needed a new growth channel and we are now very excited about what lies ahead.
Our first goal was to consolidate and gain scale and we entered this new strategy in a very severe year, with unprecedented challenges. 2020 has been very tough in terms of build-to-suit and new business. Brazilian carriers were dealing with the end of the 4G cycle and with troubles within their respective holding companies.
For towercos, Brazil has always been a relatively profitable market but since 2017, we have all struggled with rates and terms. 2020 was a story of its own, not only because of the pandemic but with the 5G auction being postponed, investments being delayed indefinitely and an overall environment not apt for growth.
In the midst of this, we at Highline got very excited about the changes we could apply to our business model. We see strong opportunities in the neutral network space and spent the last year defining our strategy to become a full network supplier to our clients.
To pursue our strategy, we went ahead with a rather aggressive M&A plan and sealed seven deals in the past year, including Oi and PTB’s assets as well as the acquisition of five small companies across Brazil. It’s been very exciting and fun!
Scaling up was a necessary step and now we believe we reached the right size and are becoming a strong contestant in the neutral network environment. We aim to be the biggest private neutral player in Brazil and while we cannot compete with listed entities in terms of size, we will keep growing and leveraging our flexibility and entrepreneurship.
TowerXchange: How is the partnership with Digital Colony instrumental to this new phase?
Fernando Viotti, CEO, Highline: The decision to change investor is tightly linked to this switch in strategy. When we decided to evolve from the pure tower model, we knew we needed the right partner. Patria was great during the tower phase but Digital Colony is made of hands-on entrepreneurs who like to take risks and be first movers in the market. The match in vision and intention was clear.
Another great aspect of our partnership with Digital Colony is the clear focus on the telecom and digital infrastructure space. It’s amazing to be surrounded by people who understand what we are doing and be able to exchange information and insights across multiple geographies and segments. It is a very enriching reality to be working in!
Additionally, Digital Colony’s capital availability makes a lot of difference, especially at this stage in our expansion trajectory.
TowerXchange: Tell us more about Highline’s new and exciting business plans.
Fernando Viotti, CEO, Highline: Currently Highline is focused on entering the neutral network segment. In fact, we realized that our clients do need to deploy active systems – especially DAS in Brazil, while small cells are still a bit behind but it will catch up in the run up to 5G. With dynamics such as network slicing on the horizon, equipment is not competitive anymore and this is a great time to be discussing initial trials with our clients.
In 2020, we also had the opportunity to acquire a network and we decided to bid for Oi’s entire operations on top of its assets. However, our clients decided to get together and acquire it and that’s when we stepped back. This was an unprecedented move by Brazilian carriers who agreed to get together and acquire Oi’s operations. We still went on and bought Oi’s towers and we are now discussing whether or not we should participate in the fibre asset component.
TIM, Claro and Vivo will need to decide how to handle Oi’s network in the future and this will have a huge impact on towercos. The whole network will be shut down and a rationalisation of the tower inventory will be carried on. There will be tower overlaps and some will surely be dismantled. This will be a lengthy process which will have an effect on our workstream.
For example, in 2019 Claro acquired Nextel and then went on for a full year without building any towers as the networks were being integrated. This is a normal procedure when an operator absorbs a network but it can have a considerable impact on towercos.
As MNOs work on the Oi’s network integration, Highline is working on its new and traditional lines of business – fibre and network on the one hand and scaling the tower business and co-location efforts on the other hand.
TowerXchange: Are you planning to somehow compete with your clients in the network space?
Fernando Viotti, CEO, Highline: In terms of towercos entering the neutral network segment, there’s been a lot of talks around it for quite some time but now everyone wants to get actively involved. Our strategy is more than offering a neutral network to offer, we actually want to become a neutral provider. Highline has no interest in competing in the retail space but only in supporting our clients with a solid wholesale alternative.
Dealing with retail is out of our mandate so if we had acquired Oi’s network, we would have sold the entire customer base. Our goal as neutral provider is to bring coverage to 100% of Brazil, beyond major cities and out of traditionally profitable areas.
TowerXchange: How were the latest deals you sealed instrumental towards future plans?
Fernando Viotti, CEO, Highline: Coverage in Brazil is mostly concentrated in capital cities at the moment and Highline has the potential to utilize its access to capital to provide network connectivity in areas where it wouldn’t be profitable for a single carrier to venture solo. That is actually our main goal – to improve the connectivity conditions of the entire country which tightly relates to an improvement in its economy.
In the meantime, we also need to focus on providing urban capacity in the run up to 5G. The acquisition of Oi’s portfolio was instrumental towards that goal as their sites are mostly located across Rio de Janeiro and São Paulo. On the other hand, PTB’s sites are well distributed across main cities and rural areas. Both were key acquisitions ahead of 5G as MNOs focus on adding an additional layer of frequency on existing sites rather than building new ones. This is normally what happens when a new network is launched, the first wave is always co-location.
TowerXchange: Do you foresee more opportunities for consolidation in the future?
Fernando Viotti, CEO, Highline: Brazil still presents some interesting opportunities for inorganic growth. There are at least three or four companies that are nearing the end of their growth cycle and they are either already up for sale or will be in the near future [Editor’s note: since the interview, IHS Towers announced the acquisition of Brazilian towerco Skysites and its 1,000 sites while American Tower announced the acquisition of Telxius, which include over 6,700 sites spread across CALA].
The market is undergoing a crucial consolidation phase and towercos already reduced from about 13 to now six players. I reckon we’ll be down to five in the not so distant future.
