Growth through acquisitions comes at a price and puts pressure on the debts of regional internet providers.

After years of consolidation among regional internet providers, the maintenance of high interest rates for longer than expected has exposed weaknesses in companies that opted for inorganic growth based on leverage. The most noticeable effect has been on the debt of these companies, which has depreciated in the face of the increased credit risk they face.

A report by Credit Guide, which assesses the stress levels of stocks in the sector, points to a division among internet service providers. Those who opted for a more conservative expansion model have managed to maintain a healthy balance sheet, even with the unfavorable macroeconomic environment. On the other hand, those who had a more aggressive expansion policy are now suffering from increased credit spreads.

“The combination of a Selic rate of 14.75%, fiber capex still weighing heavily, high churn in some names, and a closed equity window has become expensive, specifically for ISPs with weak governance or leverage in the holding company,” says Credit Guide. “The most decisive factor is the control structure and the growth model.”

One of the highlights of the report is Giga+, the operational holding company of the Alloha group, whose debentures experienced an increase of more than 3 percentage points in credit spreads. The incentivized debenture maturing in 2035 is trading at IPCA + 9.37%. This increase is explained by the company's higher indebtedness, which reached a net debt/EBITDA ratio of 3.58 times in the fourth quarter, close to the debt covenants of 3.85 times.

Giga+, controlled by eB Capital, had been undergoing an intense process of inorganic expansion. From 2024 to March of this year, the company registered six acquisitions in the interior of São Paulo, according to data from Pulso. The company was the second-highest acquiring company in that period among regional internet providers.

According to Pulso, the most active player was Brasil TecPar, from the Macquarie Capital fund, which made nine acquisitions during the period, concentrated in the South of the country. With leverage of 2.86 times EBITDA, the company saw the spreads on its debentures rise by more than 2 percentage points since the beginning of the year. In the secondary market, its debentures are traded with returns of IPCA + 11.28%, with a credit spread of approximately 4.16%.

In addition to the debt, the devaluation of Brasil TecPar's debt also reflected the acquisition of Liga, the provider acquired in 2020 by the Bordeaux fund, owned by businessman Nelson Tanure, following suspicions about its involvement with Master.

Last year, Liga's credit spreads jumped by more than 30 percentage points, following downgrades by rating agencies, citing the R$ 388.6 million reported by the company as financial investments in Banco Master assets.

“Companies controlled by private equity funds adopted a strategy of accelerated growth through serial acquisitions. The problem was that the strategy was financed with debt, and all of them reached 2025 with high leverage, heavy payment installments to sellers, and constant dependence on new capital market issuances to roll over maturities,” assesses Credit Guide.

Another example in this area was Vero, the second largest independent ISP in the country, led by a shareholder group with Vinci Partners as the main partner. Even without recent downgrades by rating agencies, the company's spreads jumped by as much as 11 percentage points in recent months, due to its increased debt.

Vero's main weakness lies in its debt structure, which has an average cost of 20% per year and consumes a large portion of its generated cash, according to the report. The company has a leverage of 3.1 times, slightly below the covenant of 3.5 times, and a gross debt stock of R$ 3.4 billion.

"This profile means that any market stress penalizes Vero disproportionately compared to healthier peers, such as Brisanet."

At the opposite end of the spectrum, Brisanet even had debentures trading with negative credit spreads in January. Even after some opening, with the worsening macroeconomic scenario , the company has managed to keep its spreads below 1% on its incentivized debentures. The bond maturing in 2032, for example, has a spread of 0.34%, paying IPCA + 8.04%.

Unlike the others, Brisanet continues to be led by its founder and, since its IPO in 2021, has focused exclusively on the organic growth of its platform, with a predominant presence in the Northeast region of Brazil. Its leverage level has remained "controlled," according to analysts, at 2.2 times EBITDA.

The leverage level is even lower at Unifique, with net debt equivalent to only 43% of its EBITDA. Also managed by its founder, the company has made 20 acquisitions since its IPO in 2021. "But the acquisitions were always of smaller providers, in the Southern region, with modest values and disciplined integration," analyzes Credit Guide.

Just like in the Brisanet case, Unifique's debentures were also traded with negative spreads and, even with the worsening market, remain below 1%. For the debenture maturing in 2028, the spread is 0.62%, with a yield of IPCA + 5.34%.

Spreads, although relatively low, reflect the "real credit quality" of these companies, according to Credit Guide. "The sector thesis for Brazilian regional ISPs remains valid, but requires rigorous selection. In stressed cases, the question is whether cash generation will improve quickly enough to sustain debt servicing in an environment of still high interest rates."