Profitability the ‘elephant in the room’ for LatAm telecom wholesalers

Business profitability is one of the top constraints for telecom wholesalers and digital infrastructure companies operating in Latin America, in addition to attracting and retaining talent, and developing new business models. 

These difficulties in the sector were one of the main topics addressed by key industry players in a panel held at the Capacity LatAm telecom infrastructure event, taking place this week in São Paulo, Brazil.

“In our case, let’s face it, the elephant in the room is profitability. Customers want price,” Iñigo del Cerro, CEO of Spain’s Ufinet, said in reference to pressure exerted by telcos and communication service providers (CSPs).

“A major challenge is how can we deploy infrastructure, ensure the profitability of what we're doing, providing network quality, service assurance, which the customers need, while at the same time reducing the price,” he added.

Del Cerro believes that the industry must come up with “new business models” to continue sustainably deploying infrastructure despite rising costs. The segment is also vying for investments, but "prices have been eroding year after year.” Unlike Europe, where prices to carriers are increasing, he said, in Latin America this "seems to be impossible."

FX is also an extra burden, as most of Ufinet’s supplies are denominated in dollars, but invoiced in local currency in most of the Latin American markets where the company operates.

The group has over 90,000km of fiber optics deployed across Latin America, with metropolitan rings connecting all the most important capital cities in the region, and leasing agreements to use its network with key carriers, such as Tigo Colombia.

Rafael Vanegas, CFO of Gold Data, said one of the main tasks faced by the company is serving cloud, hyperscalers and OTT demand across the region while ensuring the profitability of the business.

“Our challenge is to create the ecosystem with quality, reliability and with sustainability from a financial standpoint,” he underlined.

Gold Data has 64 points of presence (PoP) and operations in 11 countries, with offices in Colombia, Costa Rica, Dominican Republic, Mexico, Panama, the US and Venezuela. 

The company is currently building a US$150mn cable system in the Gulf of Mexico, due to go live in 2025, to connect Miami with Mexico City, Cancún and Queretaro. The company claims that the Gold Data 1 system will be the first cable to land in Mexico in 22 years.

The investment also represents the third and final phase of Gold Data's expansion in Mexico and will complement the company's low-latency underground network, which already connects the main datacenters in the country, according to the group.

While recognizing that it is not a new difficulty, Mike Wheeler, executive VP at NTT, said that cost is one of the biggest challenges in Latin America. “Building infra here is more expensive than elsewhere, but that’s also part of the business.”

Wheeler highlighted the growing demand for automation by CSPs as a fast-moving trend shaping the way telecom infra companies allocate resources, deploy and deliver infrastructure.

“On top of reliability, automation is key for customers,” he said. Wheeler also sees workforce attraction and retention as another major issue for the region. 

NTT claims to operate with network, cloud and datacenter services in over 190 countries, and to have over 600,000m2 of current and planned global datacenter space. The company has operations and offices across several Latin American countries.

Gabriel Holgado, executive VP of global sales at Cirion, said that Latin America continues to be a region with challenges, but also with plenty of opportunities as content moves to the cloud. 

“Sustainable growth is the name of the game,” he said, echoing his peers' comments about costs and the financial challenges.

Cirion, formerly called Lumen Latin America, announced plans to roll out upgraded Ethernet services to more than 14 major Latin American cities through the end of 2023, adding to the services offered in Buenos Aires (Argentina), São Paulo, Rio de Janeiro and Curitiba (Brazil), Santiago (Chile) and Bogotá (Colombia). 

The group has 18 datacenters throughout the region, with around 40MW in total capacity. Among its new projects, it bought land last year for a new Chilean datacenter.

In Latin America, attracting and retaining talent is another “huge” topic for the coming years, said Holgado, together with supply chain issues.

“Another challenge is working with suppliers and vendors, in that they can support you in a timely manner. Because time is money,” he said.