Less than a year after its founding AT&T Latin America Corp., the AT&T subsidiary has escalated its expansion in Latin America with an aggressive string of contract wins with the region's financial institutions. The AT&T unit just recently inked contracts that will provide data communication services to a slew of banking institutions in Brazil and Colombia. With those contracts the company's work in Latin America now extends to five regional countries, including Chile, Argentina and Peru.
In a recent coup, in late May the facilities-based provider of integrated high-bandwidth business communications services and solutions signed a $40 million, seven-year contract to provide data and IP services to the 13 institutions belonging to the Aval Group (www.grupoaval.com), a Colombian financial network. Major names in Aval include Banco de Bogota, Porvenir, Leasing de Occidente, Banco de Occidente, Banco Popular, and AV Villas. The telecoms firm will connect some 1,000 ports, integrating Aval's communications solutions with enhanced service levels, bandwidth and redundancy, as well as IP, frame relay and managed network services at all levels. With fiber optic links, radio and very small aperture terminal (VSAT) satellite technology throughout Colombia, the firm will service Aval's 800-plus ATMs in 167 of the nation's cities.
Work for Aval followed the telecoms firm's thrust a month earlier into Brazil, behind a contract it signed with the Brazilian Federation of Banking Associations (Febraban). That deal gave AT&T Latin America (www.attla.com) the opportunity to connect more than 190 financial institutions, including banks, clearinghouses and credit card managers. Working for Febraban, AT&T is supplying data communication services to Brazil's Rede do Sistema Financeiro Nacional (RSFN), a planned national network over which all transactions among the country's banks and transactions between the individual banks and the Central Bank will be conducted. The aim is to make inter-bank operations smoother, more transparent and more cost-effective.
When this issue went to press, the Febraban project was expected to launch in August 2001 and to generate approximately US$6 million in revenues over the next three years. Deployment of the project is slated for the second quarter of next year, according to Jorge Rodriguez, vice president, strategic accounts, AT&T Latin America. "Febraban was a large win for us and it secured our recognition as being a dominant player in Brazil," he says. "And Aval did that for us in Colombia."
Part of the spark for AT&T Latin America's expansion lies in its regional foundations. Rodriguez explains that although the company launched in August of last year, its founders are seasoned in the region. The company brings together FirstCom Corp., a communications firm with a presence in Chile, Peru and Colombia, with Netstream, a Brazilian exchange carrier, and the Argentine startup company Keytech LD. AT&T Latin America completed its acquisitions of Netstream and Keytech in December 1999 and June 2000, respectively-two companies that had small contracts to provide financial institutions with Internet services and domestic links.
Then followed AT&T Latin America's official launch on August 29, 2000, a day after the firm merged with FirstCom (the firm was created in October 1999). The new company's entire infrastructure was upgraded to the specifications required by AT&T laboratories back in the United States. That day, AT&T Latin America listed on the Nasdaq stock exchange (ATTL), with Patricio Northland, a Chilean native who founded FirstCom and AmericaTel (which was later purchased by Entel), charged to lead the company forward as its president and chief executive officer.
AT&T Latin America's client roster throughout South America now comprises companies including Interbank, Asbanc and Banco Sudamericano in Peru; Banco Granahorrar, ABN Amro and Lloyds PBS in Colombia; Banco Credito e Inversiones (BCI) and Chase Manhattan Bank in Chile; and Citibank, Banco Santander and Banco Itau in Brazil.
The firm concentrates on corporate customers that range from small to midsize and large companies. It entered Chile last September and the following month agreed to offer BCI clients Internet access via virtual ISP service, and preferential rates for national and international long distance calls. Consequently, AT&T helped BCI become the first Chilean bank to offer clients Internet dial-up service.
Despite AT&T Latin America's growth spurt, its path is hardly free of snares. The company faces stiff competition in the region, chiefly from local telecoms providers like Embratel of Brazil, Telecom of Colombia and Telefonica of Peru, says Rodriguez. However, he says that AT&T Latin America's recent contract signings in Colombia and Brazil affirm that the company's fortes overcome any doubts as to whether it has been firmly rooted enough in Latin America to know local markets.
"Some of the strongest attributes we have are the technology, the infrastructure, and the brand, as well as the level of trained resources that we have across the region and our presence," says Rodriguez. "We have over 2,000 employees across the region, which is a very strong tool for doing business." He says AT&T Latin America has a leg up on its competitors because "a lot of them have antiquated legacy systems, and their levels of customer service are not at the same level as that of AT&T Latin America."
Aval embraced that contention. "We chose AT&T because it presented the best cost-benefit relationship, because its network is of the latest technology and because it is a provider that offers us the support and guarantee required by the entities of Aval," says Aval's project manager Pedro Villegas. He adds: "The knowledge of AT&T Latin America of the Colombian financial sector is as good as that of the best Colombian service providers, not only for the installations that are operating but also for the experience of their personnel."
Aval hopes to use AT&T's regional and international reach to improve interaction with its offices outside of Colombia. Indeed, AT&T Latin America is pushing to enhance its international services overall, as evidenced by its July 2001 deal involving Concert. That deal introduces the AT&T Concert Frame Relay service to Latin America and provides corporate clients of the five countries in which AT&T Latin America operates access to the 300 global points of Concert. Concert offers facilities-based communications solutions for multinational companies and other business customers and institutions worldwide.
AT&T Latin America's largest test may be convincing conservative bankers to take a major plunge. Rodriguez explains that while many Latin financial institutions are technology-savvy some are flat-footed when it comes to shifting cultures. "The majority of (Latin) financial institutions have multiple carriers handling multiple parts of their business," he says. "And so when AT&T Latin America walks in offering a complete solution, they are overwhelmed but a little gun-shy." They generally hesitate to rush headlong into an AT&T solution-and instead request more information-as they fear switching their entire network over to a completely different network.
Once the contract is won, AT&T has found another challenge in dealing with Latin bankers: meeting adjusted expectations. Rodriguez says that once consumers see early results met they begin to count on an accelerated time frame, demanding AT&T Latin America to increase the speed at which they install kilometers of optic fiber.
The economic climate in the region too poses a concern. To give one indication, The Economic Commission for Latin America and the Caribbean (Cepal) recently lowered its growth expectations for the region for 2001 from 3% to 2%. While AT&T Latin America's second quarter 2001 consolidated revenue increased 63.1% to $33.6 million compared to pro forma revenue of $20.6 million in the second quarter 2000, the company saw a net loss on the quarter of $73.1 million, compared to a pro forma net loss of $33.9 million in the second quarter 2000 and a net loss of $73.0 million in the first quarter 2001.
Yet, Rodriguez says that AT&T Latin America should be able to weather the economic difficulties in Latin America this year, and the spate of bad news following two of the region's top markets, Brazil and Argentina. For one, particularly-depressed Argentina represents a small portion of the company's revenue in Latin America, and, because the firm doesn't have thousands of employees and kilometers of fiberoptics installed there, it doesn't have to worry about pulling in large sums of money, while other long-established telecoms firms do. Moreover, Rodriguez expects that while potential clients will consider cutting costs they might balk before sacrificing something as important as their goals in enhancing communication links.
