Brazil’s Datora bets on Latin American IoT markets

Brazilian mobile virtual network operator (MVNO) Datora is mulling expanding its core internet of things (IoT) business segment across the region, CEO Tomas Fuchs told BNamericas.

Currently, the company has operations in Chile, Mexico and Colombia, but mostly serves Brazilian clients with operations in those countries through local partnerships. The goal is to create a direct MVNO operation. 

"Latin America has lots of opportunities in IoT. This is what we've been looking at. Those three are super interesting countries," Fuchs said.

Roughly 0.7% of Brazil's mobile market accesses correspond to MVNOs, compared to around 7% in Colombia.

The company, through its VDF subsidiary, was one of the 15 bidders in Brazil’s recent 5G auction, but could not compete with Winity Telecom's offer for 700MHz (4G) frequency. Winity is a subsidiary of Brazilian private equity group Pátria Investimentos.

Winity paid 1.42bn reais (US$260mn) for the band, with a premium of 806% over the minimum price, beating Datora/VDF's 318mn-real offer.

The other bidder was NK 108 Enterprises and Participations, an entity created by DigitalBridge/Highline, offering 333mn reais.

Fuchs said Datora did not have high expectations, but was prepared to make a counterbid. Yet, it did not anticipate Pátria’s strong appetite.

“If you look at it, we made a proposal quite in line with that of the other competitor at stake. But nobody expected what came. This band, in particular, was way above what was expected [in terms of prices].”

A source from Digital Bridge, requesting anonymity, told BNamericas that Pátria's premium was “absurd,” rendering the group's proposal unfeasible.

AGRICULTURE IOT

With 28 years in the market and since 2012 effectively operating as MVNO in Brazil, Datora has a solid long-term strategy, offering IoT and associated services for local agribusiness.

“About two years ago, we adopted this posture, more focused on agribusiness, foreseeing the needs and opportunities in this sector. But when we reached out to the farmers, they told us: 'my friend, I can barely issue electronic invoices and you want to sell efficiency for my land'? They didn't have the basics, connectivity. That's why we decided to go after spectrum.”

Despite the auction outcome, Datora welcomes the entry of Winity, offering frequencies and infrastructure to third parties under a wholesale model.

“This [outcome] does not undermine our business plan. On the contrary: it shows that we were on the right path. Now it's about partnering so that we can get connectivity where we need it.”

Datora is already talking to Pátria and other tender winners and hopes to forge partnerships in early 2022.

Regulator Anatel scheduled the signing of the concession terms with the auction winners for December 14. 

Since the 700MHz band is already in use, and unlike the 3.5GHz one does not require spectrum cleaning, it is available almost immediately.

Datora projects investments of “at least” 150mn reais for the next 24 months. The amount could rise depending on the agreements and partnerships, Fuchs said.

Datora relies on TIM's network for its MVNO operation, under which it has also other MVNOs.

Fuchs refrained from directly criticizing large operators’ business models, but said they won’t establish connectivity outside urban centers. He cited the example of ISPs and small providers, which have been key in the fixed internet via fiber segment in Latin America.

And Fuchs promoted specific rules for the secondary spectrum market in Brazil. Although spectrum trading is not prohibited, regulation should force the assignment of spectrum by its holders in areas where the asset is not being used, such as in rural regions.

Datora Group is formed by Datora and Arqia and started operations in 1993. Three years later, it became the first to provide VoIP in Latin America, according to the company.

Arqia is the mobile technology unit and was founded in 2011 to serve the IoT market and function as MVNO enabler (MVNE), a platform assisting other potential MVNOs. 

It is present throughout Brazil and has offices in Spain, the US, Guatemala, Argentina, Colombia, France, Sweden and Israel, with a portfolio of IoT connectivity solutions/services platforms.

Datora is present in Latin America through Arqia.

The group manages over 1mn connected devices through 200 business cases and has been growing sales at a 30-40% rate in the last years, Fuchs said. The forecast is for similar or higher growth rates.

"The Brazilian IoT segment is still very incipient, still largely focused on the auto and financial markets. This market is set to grow a lot in coming years."