Brazil – the changing landscape in LATAM’s most lucrative market

Brazil, the biggest market in Latin America, already has a well-developed towerco market with 90% of sites owned by towercos. Over the last few years, it has been through a phase of consolidation driven by larger multinational towercos seeking to increase their market share through strategic acquisitions and private equity backed towercos exiting their investments. Similarly, on the telecom carrier front, Brazil's four mobile operators, Vivo (Telefónica), Claro (América Móvil), TIM, and Oi are being reduced to three, with the exit of Oi following financial difficulties. With the initial 5G deployment projects already well under way in the country, TowerXchange sums up the recent developments and the opportunities this exciting market offers.

In October 2022 Grupo TorreSur confirmed the acquisition of its final towers by SBA Communications in Brazil. This deal marks Grupo TorreSur’s exit from the market.

The sale of Grupo TorreSur’s assets has proceeded in several stages. Previously, in 2019, the company sold 1,313 towers to SBA Communications. In January 2022, IHS Towers acquired 2,115 towers across Brazil from SP5, a portfolio company of Grupo TorreSur for US$315mn. Then in August 2022, SBA Communications agreed to acquire the final 2,600 Brazilian sites from Grupo TorreSur for a total consideration of US$725mn. The acquisition will increase SBA's portfolio in Brazil by over 25%, to 12595 sites.

James Eisenstein, Grupo TorreSur’s Chairman and Chief Executive Officer, has confirmed to TowerXchange that in October 2022 SBA Communications finalised the purchase of all remaining of the firm’s assets. That likely means that the anonymous seller in Brazil that SBA Communications announced to be buying an additional 200+ sites earlier in the year was Grupo TorreSur, and anonymity was aimed at preventing early rumours of the latter company’s exit from the market.

Having completed deals with Telefónica, TIM and Nextel (later bought by América Móvil), American Tower remains the largest tower owner in the country, with 22,870 sites. Building up on a series of deals with independent towercos, as well as the acquisition of towers from a bankrupt operator Oi, the Grupo TorreSur purchase puts SBA Communication’s site count on the equal footing in Brazil with the newly formed América Móvil’s carve-out Sitios Latinoamérica.

September 29, 2022, marked the completion of the long-awaited carve-out of passive infrastructure assets of the leading regional mobile operator América Móvil into a new company, Sitios Latinoamérica, operating under the brand name “Sites”.

The towerco has an initial inventory of 29,090 towers across 13 countries, with 39% of the company’s total portfolio, or 11,233 sites, located in Brazil. This makes up 16% of the country’s total 68,563 towers, making Sites the second largest towerco in Brazil after American Tower.

Sites is undoubtedly a major player in the Brazilian towerco landscape, however, the extent of its influence on the market is yet to be seen. One of the biggest questions that the industry is asking is - how independent will Sites be from América Móvil? If Sites demonstrates real independence and a proactive commercial strategy, it could take lease growth away from the other towercos, ramping up the cost competition and the pressure to bring down operational costs, affecting projected growth rates and significantly changing market dynamics in Brazil.

Sites will be serving as América Móvil’s main provider of passive infrastructure as well as the operator’s BTS partner – contracts for building up to 900 new sites across several markets by the end of 2022 have been announced. That is likely to include any new sies in Brazil, where significant number of new build is expected following the allocation of 3.5GHz 5G licenses to all the leading operators in the country in 2021. To illustrate, América Móvil, operating in Brazil under the brand name Claro, along with Telefonica Brasil (Vivo) and TIM Brasil were each obliged to install 154 new 5G base stations in Sao Paulo alone by the end of September 2023, for a total of 462 antennas. However, the regulator received requests for almost 1,400 new antennas in the same period, suggesting that initial 5G coverage will comfortably surpass the level stipulated. Sites’s initial preferential relationship with América Móvil creates a more competitive environment for all other BTS companies operating in the market.

In addition to towercos mentioned above, DigitalBridge-backed Highline is another major player in Brazil. Over the years, it has been steadily growing its presence in the market through a series of purchases, with a current portfolio numbering 5,500 sites. This included a purchase of some of the failed operator’s Oi assets. 

TIM, Vivo and Claro have jointly acquired assets of Oi, and each have launched the search for buyers for the surplus former Oi base stations. The move is the result of pressure from Brazil’s competition regulator, obliging operators to sell off certain base stations. TIM has placed 3,610 base stations up for sale and has been offering a 75% discount to anyone who commits to buying more than 500 base stations across three different nationals codes. 

Most recently, in early October 2022, Brazil’s competition regulator, Administrative Council for Economic Defence (CADE) approved Highline’s takeover of 79 mobile towers from Algar Telecom-backed Vogel Telecom. Despite a trend for market consolidation, CADE’s General Superintendence assessed that the sale will not harm the competitive environment in the country.

Figure one: Brazilian top towercos ranked by site count *

Brazil is the region’s leader not just by the number of mobile subscribers and its sheer geographical size, but also in its adoption of 5G technologies.

Brazil’s 5G spectrum auction took place in November 2021. TIM (Telecom Italia), Vivo (Telefónica) and Claro (América Móvil) all won big in the 3.5GHz bandwidth, but it was the award of spectrum to six newcomers which made for interesting headlines. Amongst the new spectrum owners were a number of ISPs, as well as newcomer Winity Telecom, an infrastructure firm backed by Patria Investments that may lease its spectrum to other operators as part of a new infrastructure-sharing play. Winity Telecom won a national 2×10MHz 700MHz licence, having paid BRL1.428bn (US$276.8mn) – the highest bid for a single spectrum lot in the auction. Winity says it plans to build 5,000 towers by 2029 and establish itself as Brazil’s first wholesale operator.

In 2022, standalone (SA) 5G services using the 3.5GHz frequency band have been steadily rolling out in most of the nation’s state capitals. All 26 state capitals and the federal capital Brasilia have now been approved for SA 5G connectivity by the national telecommunications agency Anatel. A total of 5,275 standalone 5G base stations have been activated in Brazil – double the minimum commitment. This represents 6% of the overall 93,159 base stations in the country. By 2025, 6,370 5G base stations must be installed in the state capitals. In total, the state capitals are home to nearly a quarter of the Brazilian population.

With 5G auctions complete, towercos are now positioning themselves as more holistic providers of telecom infrastructure. The high frequencies and higher capacity of future networks will require densification that will force towercos to move away from providing traditional macro sites and rooftops. That is why towercos like IHS Towers are investing in fibre. Not only does this provide diversification in a growing market, but it lays the foundations for small cell rollouts or connecting smart poles and street furniture. 

In addition to growing its wireless infrastructure portfolio in Brazil, over the last few years SBA Communication has entered the digital infrastructure market in the country through and acquisition of fibre assets, followed by purchasing a data centre in 2022.

Brazil has also been a testing ground for new business ideas for other companies, with mobile operators Claro, TIM, and Vivo participating in Open RAN field trials, and TIM concluding the first phase of its ambitious satellite backhaul programme, reaching 1,000 sites with partner Gilat.  

Brazil is an exciting telecom market that offers significant demand, economies of scale, and comparatively smooth regulatory processes. We will see a lot more change in the coming years, as the biggest regional and global telecom operators and tower companies continue competing fiercely for a larger market share.