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Telefonica (TEF) & CDPQ JV Boosts Fiber Adoption in Brazil

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Telefonica, S.A. (TEF - Free Report) announced that FiBrasil commenced its operations, involving the deployment of the fiber-to-the-home (“FTTH”) network in Brazil. FiBrasil is a fibre wholesale network, which was created out of a 50:50 joint venture between Telefonica Group and Caisse de dépôt et placement du Québec (“CDPQ”), a Canada-based investor in infrastructure, under a co-control governance model.

Markedly, Spanish telecom giant Telefonica’s 50% interest is held through its subsidiaries — Telefonica Brasil (“Vivo”) and Telefonica Infra — each holding a stake of 25% as part of the agreement. With FiBrasil’s launch, the stand-alone optical fiber wholesale network in Brazil currently caters to 1.6 million households in 34 cities and intends to reach an additional 500,000 households by the end of 2021.

Impressively, the announcement of the milestone event, which comes just a few months after its formation, is expected to not only drive Vivo’s top-line growth but also diversify CDPQ’s infrastructure business across Brazil and the wider Latin America region. Notably, the new company will have a fully independent team and function with a workforce of more than 150 employees.

FiBrasil’s neutral fiber network is considered ideal for clients with lower capital requirements and shorter time-to-market. Consequently, this will help in augmenting its network footprint across various customer segments, thereby, speeding up the transition to fiber for digital development. Capitalizing on the FTTH capabilities, the partnership is aimed at funding future digital infrastructure needs of Telefonica Brasil on the back of CDPQ’s robust investment expertise.

Interestingly, Vivo will serve as FiBrasil’s first wholesale customer under a 10-year contract. It will leverage FiBrasil’s infrastructure to boost its presence in Brazil as part of the fiber network expansion plan in the coming years. Markedly, Vivo plans to reach nearly 24 million households by the end of 2024, thereby, extending its network coverage to more greenfield cities. Supported by such operational resilience, FiBrasil plans to deploy its fiber infrastructure to 5.5 million homes and businesses over the next four years.

Over the past few years, Telefonica has invested heavily in the deployment and transformation of its network to provide seamless connectivity, with enhanced capacity, speed, coverage and security. With operations across 17 countries, the Spanish telecom company is capitalizing on the opportunities in the digital world through several growth strategies to enhance long-term prospects, while experiencing healthy momentum in the smartphone market.

Shares of the Zacks Rank #3 (Hold) company have gained 16.1% compared with the industry’s growth of 7% in the year-to-date period.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Some better-ranked stocks in the broader industry are UGI Corporation (UGI - Free Report) , CenterPoint Energy, Inc. (CNP - Free Report) and New Jersey Resources Corporation (NJR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UGI Corporation delivered a trailing four-quarter earnings surprise of 58.2%, on average.

CenterPoint Energy delivered a trailing four-quarter earnings surprise of 15.2%, on average.

New Jersey Resources has a long-term earnings growth expectation of 7.1%.

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