Magazine article Global Finance

The Americas: AT&T Latin America Copes with Shaky Currencies

Magazine article Global Finance

The Americas: AT&T Latin America Copes with Shaky Currencies

Article excerpt

The threat of currency devaluations comes with the territory for companies doing business in Latin America. Life goes on, nonetheless.

"We are here for the long term," says Patricio Northland, chairman, president, and chief executive of AT&T Latin America. "Whenever there is a devaluation, prices always catch up. In Latin America, by definition, there is always volatility in macroeconomics.We have built a business plan to adapt to these changes.'

Whether there is a possible devaluation of the Argentine peso, a political crisis in another country in the region, or an energy crisis, his company's business plan is sound, and it is working, Northland says. The value of the company is in its future cash flow.

"Our corporate mission is to build an advanced, full-service telecom company in Latin America, targeting businesses and financial services in 14 specific cities with high-growth potential;' he says.

With operations in Argentina, Brazil, Chile, Colombia, and Peru, the Miami-based company is banking on a $23 billion market that will grow to $37 billion in the next five years, according to Northland.

"There is a huge opportunity for revenue growth," he says. "Even in Colombia, the risk of us losing our business is minimal.All of our fiber is under ground, and we are very diversified, serving companies of all sizes."

Despite challenging market conditions,AT&T Latin America's third-quarter revenues increased 60.6% from the same period of last year.The gain would have been higher absent the devaluations of the Brazilian real and the Chilean peso.

The company uses currency forward contracts for hedging purposes. Changes in the fair value of currency hedges resulted in a net gain of $17.7 million in the first half of 2001, which helped to offset translation losses of $26.2 million.

High bandwidth data and Internet services represent a majority of total revenue.

"Businesses are migrating to high-speed data networks, and we provide one platform to serve all their telecom needs," Northland says. "Nobody else has our comprehensive network architecture."

The data-intensive financial services industry is a strategic sector for AT&T Latin America."Banking requires exactly what we provide: network management services," Northland says.

Customers include Interbank,Asbanc, and Banco Sudamericano in Peru; the AVAL Group, Banco Granahorrar,ABN-AMRO, and Lloyds PBS in Colombia; Banco Credito e Inversiones and J.P Morgan Chase in Chile;American Express in Argentina; and Citibank, Banco Santander, and Banco Itau in Brazil.

In April the company was selected by the Brazilian Federation of Banking Associations for a three-year project to connect more than 190 financial institutions.

As it builds its network,AT&T Latin America is finding that its vendors are willing to lend it the money to pay for the equipment. …

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