Brazil’s Padtec opens Lima office to meet growing Andean fiber demand

Brazilian optical equipment manufacturer Padtec opened an office in Lima to meet growing fiber connectivity demand by providers in the Andean and Central American regions.

The launch of the commercial unit in Peru began to be structured more than a year ago – before the political turmoil currently engulfing the country, BNamericas was told.

The main goal is to expand Padtec's regional presence and facilitate sales support and customer operations in the region.

“Padtec has always been a regional company. We have always been present in Latin America. But from 2018, we decided to accelerate this process. Our strategy has always been very clear: to expand first to Latin America, then North America, and then we cross the oceans,” Manuel Andrade (pictured), CEO of Padtec North America and head of international operations, told BNamericas.

Lima is the company's fourth office in the region. In addition to Brazil, the others are in Argentina, Chile and Colombia. 

The first unit was opened in 2006 in Argentina, followed by the US (2014), which also serves the Mexican and Caribbean markets, Colombia (2016) and Chile (2018).

In 2021, Padtec signed a distribution agreement covering Europe and North Africa and, in 2022, a distribution agreement for Mozambique and Angola.

DEMAND FUELING BUSINESS

Part of the reason for the office launch in Peru was the expansion of Colombia's Internexa, a current client, to that country, Andrade said. 

In addition to Internexa, Padtec has also provided equipment and related services to local firm Fiberlux, in Miraflores, according to Andrade. Data by Peruvian regulator Osiptel shows the group of companies formed by Fiberlux and Fiberline has been among the fastest-growing internet service providers in the country.

Padtec is already talking to potential customers in Peru, Andrade said.

“The northern part of South America and Central America, as well as the Caribbean, have grown steadily over the past 15 years. We grew a lot in Colombia and started to add clients in neighboring countries. The office came as a natural need to better anticipate this market,” he said.

On the political crisis, Andrade said, “macropolitics, for us, is indifferent. If there is one thing that is agnostic it is technology, the need for broadband.” As an example, he cited Padtec's Venezuela presence.

In all, Padtec reports having illuminated (activated) more than 300,000km of fiber networks in Latin America with its dense wavelength division multiplexing (DWDM) equipment. One of the company's main regional clients is Ufinet, which is present in 14 Latin American countries with over 90,000km of fiber backbone.

According to Andrade, a study by Omdia places the Brazilian company as the third largest regional DWDM player, with around 10% market share.

First is Huawei, with just over 40% share, followed by Nokia, with around 20%. Andrade said Padtec recently passed Infinera and Ciena, in Latin America, in market share.

In Brazil, the company's main market and where Padtec claims leadership in the internet service providers segment, competition has become fiercer with the expansion of Chinese providers. “Brazil is our main market, our playing field. We have managed to beat competitors by having pre-sales, sales and post-sales services. Chinese [competitors] don't have that.”

Padtec manufactures the equipment for the local and global market entirely in Brazil.

According to Andrade, all competitors have advantages when playing at home. “In the US, it's [market leaders] Ciena and Infinera. In Europe it's Nokia. In Japan, it's Fujitsu. In China, Chinese [companies] have 97% of the market.” In his view, Latin America is the world’s most competitive and balanced DWDM market.

Padtec has grown at an average of 50% in sales annually over the last four years, according to Andrade. The target for this year is to achieve similar rates, but winds are not favorable with the high interest rates. “We are cautiously optimistic about 2023.”

Currently, around 20% of the company's revenues come from outside Brazil, a share which has been growing year after year.

For now, Padtec has no plans for new offices in the region, as other markets can be served well remotely or via partners.

Padtec reported gross operating revenues of 319mn reais (US$61.6mn) in January-September 2022, down from 326mn reais in the year-ago period. 

In Q3, foreign revenues more than doubled, reaching 36.1mn reais. The company also posted net income of 12.2mn reais in the quarter, up from 4.6mn reais, but net debt increased to 50mn reais.

Despite the increase, Padtec wrote in its Q3 report that its “capital structure allows [the company] to conduct its operations safely and sustainably, maintaining current financing operations available for its customers.”