Claro Buys Desktop for $750M, Boosts Brazil Fiber Presence

In a significant move to consolidate its position in the Brazilian telecommunications market, Claro Telecom Participações S.A., a subsidiary of the Latin American giant América Móvil, has entered into a definitive agreement to acquire Desktop S.A. for approximately R$4.0 billion (around $750 million USD), including debt. This transaction, subject to regulatory approvals, marks a substantial expansion for Claro in the rapidly growing Brazilian internet service provider sector.

Desktop S.A., a prominent fiber optic network operator in the state of São Paulo, has experienced remarkable growth since its acquisition by alternative investment firm H.I.G. Capital. Under H.I.G. Capital's stewardship, the company transformed from a regional player with roughly 150,000 subscribers to a leading national provider boasting over 1.2 million customers. This expansion was fueled by a dual strategy of aggressive organic growth and the successful integration of ten strategic acquisitions, creating an extensive fiber network spanning more than 58,000 kilometers and reaching over 200 cities.

The acquisition by Claro is expected to significantly enhance its broadband offerings and competitive edge in Brazil, a market where fixed broadband penetration continues to climb. Brazil's internet service provider market has seen considerable investment and consolidation, driven by increasing demand for high-speed connectivity for both residential and business users. Desktop's established infrastructure and subscriber base make it a highly strategic asset for Claro as it aims to capture a larger share of this dynamic market.

H.I.G. Capital, which manages $74 billion in capital, highlighted its active approach in driving value creation within its portfolio companies. Fernando Marques Oliveira, Managing Director and Head of H.I.G. Latin America, commented on the successful exit, emphasizing the collaborative effort with Desktop's management team to scale the business into a leading fiber platform. The firm's involvement also extended to supporting Desktop's successful initial public offering on the Brazilian Stock Exchange (B3) in February 2021, a pioneering move for an ISP in the country.

This deal underscores the ongoing trend of consolidation within the Latin American telecom sector, where larger players are acquiring smaller, agile companies to expand their network reach and service capabilities. The valuation of R$20.82 per share, based on Desktop's net debt as of September 30, reflects the premium attached to well-established fiber infrastructure and a substantial customer base in a key growth market. The transaction is anticipated to close following customary regulatory reviews.

Claro, a part of América Móvil, is one of Latin America's largest telecommunications providers, offering a comprehensive suite of services including mobile, broadband, and pay TV. Its acquisition of Desktop is a clear indicator of its commitment to strengthening its fixed-line operations and leveraging fiber technology to meet evolving consumer demands. This strategic integration is poised to create a more robust and competitive telecommunications offering across Brazil.