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Connectivity demands of datacenter projects, fiber connection to 5G antennas and the expansion of fiber broadband for corporates and homes are driving growth for Brazilian optical equipment manufacturer Padtec, CEO Carlos Raimar said in an earnings conference call.
The company reported operating revenues of 206mn reais (US$38.8mn) in the first half, up 63.7% year-over-year. In Q2, operating revenue came to 120mn reais, which Padtec said was the highest quarterly figure in the last five years.
Sales of DWDM (dense wavelength division multiplexing) technology to optimize the use of fiber network equipment, its core product, jumped 75.6% in the first six months compared to the same period 2020.
“The change in the dynamics of the Brazilian telecommunications market, with the accelerated adoption of fiber optic networks for residential and corporate applications, is now being replicated in other countries in Latin America. It is, without a doubt, an opportunity to expand our business in these regions,” Raimar said previously in a statement.
The prospect of activating 5G mobile networks in Brazil is generating a strong push to build communication networks across the country, both by operators and by regional providers, the CEO said.
“To support 5G, investment in high-capacity optical networks should significantly increase the demand for DWDM equipment, benefiting our direct customers and their users and paving the way for a society with more connectivity and quality in data services,” he said.
Raimar estimated that more than 60% of the connectivity of 5G antennas will be made over optical fiber.
Padtec has offices in Brazil, the US, Colombia and Argentina, in addition to 40 points-of-presence (PoP) in Latin America.
A PoP is where an internet service provider maintains the necessary telecoms equipment to allow customers/users to have local access to the internet.
Replying to BNamericas, Raimar said the company plans to activate new PoPs in the region to handle the surge in market demand.
FOOTPRINT
Regionally, Argentina is Padtecs hub for sales to Chile, Paraguay and Uruguay, while Colombia is the hub serving Peru, Ecuador, Venezuela and Central America.
Argentina, Brazil and, to a lesser extent, Colombia are strategic markets due to the landings of submarine cables, some of which rely on optical equipment supplied by Padtec, said Raimar.
The company is the exclusive supplier of optical repeaters for Googles Junior cable, a 400km route connecting Rio de Janeiro to Praia Grande in São Paulo state.
Padtecs main competitors in the optical segment are Ciena and Infinera, but Raimar claims his company is the only one to manufacture DWDM equipment below the equator.
According to the CEO, Padtec is also the sole optical firm to have a direct, end-to-end operation in its markets in the Americas, offering manufacturing for pre-sales and post-sales.
In addition to the Americas, Padtec recently inked a partnership with the Televés group, a Spanish multinational focused on the distribution of telecoms infrastructure solutions, for indirect operations in Europe, the Middle East and Africa (EMEA).
Under the agreement, the DWDM solutions developed by Padtec will become part of the Televés product line.
Despite the deal with Televés, Raimar does not rule out a direct operation in Europe to serve big carriers.
SHARE OFFERING
Earlier this year, Padtec considered making a follow-on share offer, but backtracked after not reaching the desired pricing in the pre-offer conversations with market agents, said CFO Renato Jordão.
“We continue to study a follow-on to make acquisitions, develop products and accelerate the entry into international markets. We are testing the market and looking for the best time,” he told the call.
"But we dont want to risk destroying shareholder value in a rushed fundraising."
Raimar added Padtecs cash position is "comfortable," but that at some point the company will need to access the market to support its “immense” growth ambitions.
ISPs
The company is also upbeat about the series of IPOs by internet service providers and the investments of private equity firms in these players.
“For us, these IPOs are always welcome because that means further cash for ISPs to grow their networks,” said Raimar, adding that many of the main ISPs in Brazil are Padtec customers. |
