GUATEMALA merges with globalisation Interview with Mr. Jose M. Padron Read our exclusive interview Mr. Jose Miguel Padron Vice President & CEO Central America Contact: 1300 Sawgrass Corporate Parkway Suite 110, Sunrise, FL 33323 Tel: 954-233-0025 ext. 1016 Fax: 954-233-0030 E-mail: jpadron@convergence-com.net Website: www.cciglobal.net In Guatemala 12 Calle, 1-25, Zona 10 Edificio Geminis, 10   Torre Norte, Oficina 1401 Guatemala City, Guatemala 001010 About Us Convergence Communications, Inc. (CCI) is a premier facilities-based company provider of integrated broadband telecommunication solutions to business and governmental customers in Mexico, Central America and the Andean region. CCI provides integrated, end-to-end communications solutions that meet the diversified needs of more than 49,000 customers over a common IP-based technology platform. CCI's focus is delivering critical business applications to every customer, in every country we serve. Through strategic acquisitions and partnerships, CCI has assembled a dedicated team of local communications professionals, each of whom is devoted to providing professional business services to every customer. Operations Convergence Communications, Inc., (CCI) founded in 1995, and based in Sunrise, FL, is a Latin American facilities-based, telecommunications company which owns and operates an IP-based, broadband, last mile access network and provides service in over 32 major metropolitan areas. The Company offers a "one-stop" menu of broadband connectivity, IP-telephony, high-speed Internet access, web-site hosting, virtual private networks and e-commerce services to over 47,000 institutional, corporate and residential customers in Latin America. The Company has established a strategic regional footprint, operating in nine countries: Mexico, Guatemala, El Salvador, Costa Rica, Panama, Venezuela, Honduras, Nicaragua and the Dominican Republic. Here are some recent highlights In June 2000, CCI entered into an agreement with Alcatel, S.A., a world recognized telecommunications equipment manufacturer and system integrator, to design, construct and integrate our telecommunication networks. Alcatel will deploy a state-of-the-art, multi-service IP network in 17 cities across Mexico, Venezuela and Central America. As part of the agreement Alcatel will provide up to $175 million of financing to CCI. In October 1999, CCI closed a $109.5 million equity and debt facility with six strategic investors. Consolidated revenues increased from $3.1 million in 1998 to $9.1 million in 1999, and consolidated assets increased from $42.5 million to $97.2 million during the same period. CCI's plant, property and equipment grew from $8.5 million in 1998 to $28.4 million in 1999. CCI completed the acquisitions of International Van, S.A. de C.V., Mexico's second largest data provider and the GBnet Corporation, Central America's largest data and Internet service provider, and Cybernet, the largest ISP and data provider in Guatemala. CCI acquired fiber-optic assets in Mexico City and formed a joint venture to build networks in seven of the largest cities in Mexico. CCI's network is designed around an IP-based technology platform that uses packet switching to transmit voice, video, and data elements over the same system. The IP platform is intended for use with a flexible delivery network that uses fiber-optic, coaxial cable and wireless distribution systems. CCI believes this approach allows the most efficient delivery of high-speed "last-mile" connectivity with their IP-based service offerings, and provides an economical method for delivery of high quality, bundled communications services. CCI offers a bundled telecommunications solution which typically consists of the following services Managed Data Network Services: CCI offers business customers a variety of end-to-end network services for their point-to-point and point-to-multi-point telecommunications needs. These services range from simple connections to customized private telecommunications network solutions, including high-speed data transmission and virtual private networks. Full Suite of High-Speed and Dial-Up Internet Access Services: The company offers Internet access services primarily to corporate and governmental users. However, residential access service is available as well. Services include both high-speed and dial-up Internet access using high-speed systems. Web and Application Hosting: Web hosting services are available to facilitate customers' electronic commerce and electronic business initiatives. Those services include a number of information technology services such as web page design and the design, installation and integration of intranets, extranets, and virtual private data networks. Telephone Services: CCI will offer a bundled suite of telecommunications service including a complete menu of telephony services in its markets as regulation on licensing permit. Currently the Company offers telephony services in Guatemala and El Salvador. Video Services: Cable television or CATV services are offered in El Salvador (where CCI owns the largest CATV system) and Guatemala. Those systems have over 37,000 subscribers. Mission/Vision The business strategy of Convergence Communications is to fully develop the opportunity that exists in Mexico, Venezuela and Central America to expand integrated communications services for the business customer. CCI is well positioned to capitalize on recent deregulation in the marketplace and capture first-mover advantage, particularly as a result of currently low telecommunication penetration rates in its countries of operation. CCI's mission is to make the most out of advances in the telecom sector as services converge and become more technologically advanced. CCI currently offers bundled telecommunications solutions via CCI-owned and operated broadband next-generation Metropolitan Area Networks. Through strategic acquisitions and partnerships and a concentrated focus on the last-mile network, CCI is becoming the premier integrated service provider on a pan-regional basis. By offering a "one-stop" menu of broadband connectivity, IP-telephony, high-speed Internet access, website hosting, virtual private networks and e-commerce services to a rapidly developing market, CCI is helping these countries leapfrog generations in technology and help the company establish a strategic regional footprint. Market Opportunity Currently, the combined telecommunications market worldwide is believed to be in excess of $700 billion and is expected to grow to $1.0 trillion by the year 2002. Industry growth is driven by several factors, such as, increased demand for applications such as electronic commerce, video-on-demand, and video conferencing. Internet access and data services are arguably one of the fastest growing segments of the telecommunications market, with an estimated 116 million Internet users worldwide. The Latin American telecommunications industry is changing rapidly, particularly with the widespread privatization of existing networks. Countries in Latin America that are or have started to deregulate have done so as their governments have recognized the need to introduce market competition. Some of the countries in which CCI operates participate in the World Trade Organization Agreement to promote competition in their respective countries' telecommunications industries. These include: Mexico, Venezuela, El Salvador, Guatemala, and the Dominican Republic. Due to increased demand, operators of privatized telecommunications systems have not been able to adequately respond to the need for efficient service. The increased demand for telecommunications services is expected to result in significant revenue potential in the Latin American market. Growth in overall telecommunication revenues is expected to be approximately 12% per year, while growth from data services is expected to achieve a compounded annual growth rate of approximately 41% through 2002 (assuming economic stability), as compared to 13% in the United States. There are several reasons for growth, including: Increased Competition: With more competitors entering the Latin American telecommunications market, the range of services available should expand. Existing providers in deregulated markets have existing customer bases, but CCI believes that these companies have not focused on providing quality services at competitive prices. Service demand should increase once competitors are able to offer better services at lower costs. The Entry of Globalized Businesses into Latin America: With corporations from more developed markets expanding operations into Latin America and Latin American corporations developing more global operations, the need for private data networks and broadband capacity should grow. Technology Changes: Historically, Latin American markets have been dependent on telecommunications systems based on technology and equipment which have limited bandwidth capabilities and relatively poor transmission quality. CCI believes that the demand for high bandwidth and broadband services will increase as telecommunications infrastructure improves and the use of data intensive applications becomes feasible in Latin America. One of the most notable trends arising from the growth of the Internet is the adoption of the IP as the standard for wide-area corporate communications. IP allows computers with different architectures and operating systems to communicate with one another. CCI believes that telecommunications companies will increasingly shift from traditional circuit-switched networks to packet-switched networks by incorporating IP into their systems. Increase in the Use of the Internet: The Latin American Internet market is generally thought to be several years behind the Internet market in the United States in terms of market penetration of both Internet use and Internet related services. Actual use varies by country, but was estimated to be, on average, less than 1% (compared to 19% in the United States) in 1997, and is projected to increase to 4% by 2002 (compared to over 40% in the United States). Business Solutions Emerging technologies have improved the value and capacity of networks that combine different types of delivery systems, in part because of the convergence of traditional voice, data and video switching technologies. CCI's IP-based technology platform allows the transmission of voice, video and data elements over the same network using a combination of fiber-optic, coaxial cable networks and wireless communications systems. This approach allows CCI to provide "last mile" connectivity with IP-based service offerings, giving an economical method of delivering high-quality, high-speed bundled communications services. CCI offers a large variety of telecommunications services, including high-speed broadband, high-speed data transmission, high-speed and dial-up Internet access, voice, video and value-added services in many of their markets. The company allows customers to individually combine services into personally designed packages, rather than offer generic service packages for a "typical" customer. This sales strategy is believed to reduce switching barriers for potential subscribers who may be reluctant to switch all of their telecommunications services, or for subscribers with existing contracts with other service providers. Business Strategies CCI's business objective is to be the premier facilities-based provider of integrated broadband telecommunication solutions to business and governmental customers in Mexico, Central America and the Andean region. Strategies to achieve that objective include the following: A focus on underserved markets in Latin America CCI provides and intends to expand its integrated communications solutions in underserved markets in the Mexican, Central American and Andean regions of Latin America. These areas have a combined population of more than 162 million people, and there is a large and growing demand for telecommunications services in these markets. As the first provider of competitively priced bundled telecommunications services in many of these rapidly deregulating markets, CCI believes it can secure a significant subscriber base and market share with minimal turnover. Strategic acquisitions of subscriber bases and support services In addition to developing a subscriber base through the promotion of its own telecommunications services, CCI will continue to increase its subscriber base with selective acquisitions of existing telecommunications providers' subscriber bases. CCI benefits from the revenue generated by these acquisitions and from the vertical integration of key service providers. During the past year, CCI acquired existing telecommunications subscriber bases in Mexico, El Salvador, Guatemala, Panama, Costa Rica, the Dominican Republic, Honduras, Nicaragua and Guatemala. CCI focuses on providing Internet and network services to the business customer CCI's focus is on initial network development and acquisition activities for high-speed and dial-up Internet access, network services and value-added services for its business customers. The subscriber base for these services is, in general, more affluent and stable. By first emphasizing those services, the company believes it will be able to achieve positive cash flow more quickly. CCI uses their own broadband communications networks CCI provides a significant portion of its telecommunications services through its next-generation transmission networks. CCI intends to acquire proprietary transmission networks in markets where it currently leases network rights from other parties. The flexibility of the network architecture allows CCI to minimize the deployment of network equipment not associated with revenues, since a significant portion of its planned capital expenditures will be for the purchase of subscriber premises equipment, which is generally deployed only when the company acquires subscribers. In addition, CCI's systems do not need to cover an entire market before being able to initiate service in that market. By contrast, competitive wireline networks incur the majority of their costs before the first paying customer is switched on. Multiple delivery systems CCI uses a combination of fiber-optic cable, coaxial cable and broadband fixed wireless transmission networks to deliver services. This approach allows the most flexible and efficient delivery of high-speed "last-mile" connectivity and provides a lower overall network cost for delivering bundled telecommunications services. Concentration on End Users CCI offers services directly to end-users, rather than positioning themselves as a wholesale network service provider. By deriving revenues from providing telecommunications services directly to end-user customers, the company believes it will quickly establish a sustainable and broad customer base. By offering state-of-the-art last-mile connectivity, significant barriers for competition will be created and will be difficult to overcome. This strategy should minimize the risk of generating substantial revenues from only a limited number of sources, and should maximize revenues and profitability by allowing access to the higher priced retail market. Maximization of subscriber penetration and focus on the business customer CCI offers services in markets where it is believed to have the most potential to generate significant subscriber growth. These include the major metropolitan areas in Mexico, Venezuela, Guatemala, El Salvador, Costa Rica, and Panama, the primary business centers for each country, which have a potentially greater demand for telecommunications services. Once an operating platform in a market area is established, CCI focuses on maximizing subscriber growth through careful segmentation of the business customer base, customizing the services offered to each identified segment and competitively pricing those services. Use and support of local management CCI relies on local managers in each market. Local managers play an active role in securing network rights and obtaining necessary regulatory approvals, assist in arranging, identifying and evaluating opportunities for our business, and provide local advocacy for CCI operations. CCI local managers typically have operating experience in the telecommunications industry, and have corporate operations support in the United States. CCI's use of local managers allows the company to respond rapidly and effectively to operational matters, develop and maintain effective working relationships with local partners and capitalize on opportunities. With several recent acquisitions of regional companies, CCI has been able to retain local experienced management. Strategic alliances: CCI has entered into several strategic alliances with a number of companies already active in the Latin American telecommunications markets. These partners are both influential and respected within their countries or regions, and typically work closely with CCI senior management. Source: Convergence Communications, Inc. Network Technologies CCI uses an IP-based technology platform that uses packet switching to transmit voice, video and data elements over the same network in most markets. This technology is combined with a delivery system that uses fiber-optic networks, coaxial cable networks and wireless telecommunication networks. This architecture allows the most efficient delivery of high-speed "last-mile" connectivity with IP-based service offerings, such as Internet, intranet, extranet and voice services. An IP-based platform provides an economical method for delivering high quality bundled communications services. CCI plans to provide voice, data, Internet and video services over the same network architecture in each market of operation. The company also intends to convert any non- IP-based platforms it has acquired (such as ATM/frame relay systems) to IP-based platforms. The strong demand for higher transmission speed and bandwidth, and the emergence of a number of new technologies applicable to the communications industry, has resulted in a convergence of data and voice transmission. CCI believes that this convergence is creating a fundamental change in the telecommunications industry - a move from the traditional circuit-switched networks that were primarily designed for voice communications to packet-switched networks using IP technology. This technology makes it possible to move information at a lower cost, because IP makes more efficient use of a network's capacity. Circuit-switched networks use a single circuit for each conversation, and route each data transmission separately. Each conversation occupies an entire circuit or portion of the network for the duration of the call or data transmission, even if there are times when no data is being transmitted. In a packet-switched network, however, there is no single unbroken connection between sender and receiver. When information is sent, it is broken into small packets that are mixed with other transmissions, sent over many different routes at the same time, and then reassembled at the receiving end. IP is used as the basic form of creating and reassembling the packets and ensuring the packets reach the correct destination. Because IP packet switching makes it possible to fill a network's entire capacity with packets, it can move large amounts of information efficiently. The graphs below illustrates the differences between circuit-switched and packet-switched technologies transmissions, sent over many different routes at the same time, and then reassembled at the receiving end. IP is used as the basic form of creating and reassembling the packets and ensuring the packets reach the correct destination. Because IP packet switching makes it possible to fill a network's entire capacity with packets, it can move large amounts of information efficiently. Circuit Switching Technology Packet Switching Technology Source: Convergence Communications, Inc Packet-switched networks have less overhead costs than traditional circuit-switched networks, which also translates into cost savings. Sprint Corporation, for example, estimates it will save 70% over circuit switching with its packet-switched network. For a provider with both local and long distance facilities to move a 650-megabyte CD-ROM worth of information (which is the equivalent of the contents of eight encyclopedia volumes) from New York to London over a traditional public circuit-switched telephone network would cost the provider approximately $27.00. The cost to move the same amount of information over an IP network would be only about $2.00. These cost savings are illustrated in the graph below: Cost of Moving Information from New York to London Source: Gemini Consulting The illustration below outlines the hierarchical transport layers of a packet-switched network versus a competitor's circuit-switched network: Packet-Switched Hierarchy Circut-Switched Hierarchy IP Packets IP Packets Ethernet Lan Emulation Fiber ATM Sonet Fiber CCI believes that IP-based architecture facilitates a significantly more sophisticated bandwidth management capability. Most CCI competitors offer only limited bandwidth guarantees, such as high-level voice, video and data management but CCI can actively manage bandwidth at a service layer. This means that CCI can allocate bandwidth on demand to a particular data stream, voice conversation or video stream, as needed. This capability makes CCI service stand out in the marketplace. CCI combines packet-switched technology with a delivery network that uses hybrid fiber-optic and coaxial cable networks with wireless telecommunications systems. Over the last few years, high-frequency radio transmission has been shown to be a reliable, high-capacity, scalable telecommunications transport network method, and standardized point-to-point and point-to-multipoint equipment is now available from numerous vendors. In late 1999, CCI began the process of selecting a technology partner to assist them in the design, construction and financing of their integrated networks. The company fielded responses to their request for proposals from several of the world's largest telecommunications systems builders and integrators. In early 2000, the partner selection process was narrowed to three potential vendors and, in March 2000, CCI entered into an umbrella agreement with Alcatel. Alcatel has operations in over 130 countries and annual revenues of over $22 billion and is a world recognized builder of next-generation telecommunications networks. The umbrella agreement is contingent upon negotiating with Alcatel the terms of separate turnkey contracts for the various segments of the CCI network. Alcatel and CCI have agreed to a technology partnership that both companies value at $175 million. Under the terms of the agreement, CCI will work with Alcatel to expand their networks in over 17 major metropolitan areas in Mexico, Guatemala, El Salvador, Costa Rica, Panama and Venezuela. Alcatel has agreed to construct a state of the art, "pure" IP network for CCI that will function for both voice and data applications. Alcatel's significant network design, construction and systems integration experience which will be used in building its first, next-generation IP network to be deployed in Latin America on a pan-regional basis. The following graph provides a comparison of the relative transmission speeds of various technologies: Packet Switching Technologies Improve Faster Source: Northeast Consulting Resources, Inc. Source: Convergence Communications, Inc. Customers CCI provides integrated, end-to-end communications solutions that meet the diversified needs of more than 49,000 customers worldwide. An introductory list of CCI's Customers include: - ABB Vectco Gray de Venezuela, C.A. . - Citibank - Cyber Office 2020, C.A. - Etheron - Eurobanco - GBM Corporation - GBM Costa Rica - Intelysoftware de Venezuela, C.A. - Intesa - Kimberly Clark - Lotus Notes - Mas Activo - Noble Drilling de Venezuela C.A. - Philipp Morris - Protokol Sistemas - Radio Mundial - Terra Networks Venezuela - Vepaco - Viptel Partners CCI is committed to offer advanced broadband solutions at competitive pricing on a regional approach, supported by superior customer service. To achieve that goal, CCI partners with industry-leading companies in the many varied marketplaces worldwide. Some of our partners include: Alcatel Intershop Communications, Inc Investors Convergence Communications' mission is to be the leading provider of broadband services--voice, cable, e-com, and Internet--in Latin America. Convergence leverages its experience, best practices, and sales and service expertise across geographical boundaries to deliver unsurpassed value to its investors. Potential shareholders, individual or institutional, will find essential financial data and corporate information in this section. CCI Factsheet Convergence Communications, Inc., (CCI) founded in 1995, and based in Sunrise, FL, is a Latin American facilities-based, telecommunications company which owns and operates an IP-based, broadband, last-mile access network and provides service in over 152 cities. The Company offers a "one-stop" menu of broadband connectivity, IP-telephony, high-speed Internet access, web-site hosting, virtual private networks and e-commerce services to over 47,000 institutional, corporate and residential customers in Latin America. The Company has established a strategic regional footprint, operating in nine countries: Mexico, Guatemala, El Salvador, Costa Rica, Panama, Venezuela, Honduras, Nicaragua and the Dominican Republic. Management Team Lance D'Ambrosio - Chairman Douglas K. Jacobs - Chief Executive Officer Brian Reynolds - President and Chief Operating Officer Jerry Slovinski - Senior Vice President and Chief Financial Officer Troy D'Ambrosio - Senior Vice President, Legal and Administration, Director Tom Burgos - Senior Vice President Technology & Network Operations Tony Read - Chief Information Officer & Senior V.P. of Information Technology Luis de la Fuente - Senior Vice President Strategic Alliances & Planning Mario Vazquez - Chief Executive Officer, Mexico Maritza Escalona - Chief Executive Officer, Venezuela Jose Miguel Padron - Chief Executive Officer, Central America William Levan - Vice President Technology Development Amaury Rivera - Vice President Strategic Marketing & Sales Anthony Sansone - Vice President, Treasurer & Secretary Gary Barlow - Vice President Accounting & Taxation Ron Bouganim - Vice President, Business Development Services and Solutions Managed Data Network Services CCI provides secure, high quality, local and international data communication links over its network for customers' multiple business locations. The Company also provides network design and integration services. Full Suite of High-Speed and Dial-Up Internet Access Services CCI provides high-speed Internet access through its broadband networks in speeds from 128K to 1 Megabit. Telephony Services CCI is pioneering next-generation IP-voice services which in addition to basic telephony services include: e-mail, voice messaging, fax services, "Follow-me" global numbers, pager and web notification and the provisioning of US 800 numbers through Computer Telephony Integration (CTI) and "real" telephony. Web and Application Hosting CCI provides corporate customers the ability to maintain their mission-critical and networking hardware on secure and redundant servers in the Company's network. Corporate and personal web site hosting allow customers to conduct business online including credit card transaction processing, product catalogue display and a shopping cart service. Company News April 26, 2000 - Convergence Communications Inc. Acquires Fiber Optic Network and the Largest Internet Service Providers in Guatemala - Acquires Cybernet, largest Internet service provider (ISP), as well as the assets of STS, the second largest cable system in Guatemala - acquisitions valued at $13.5 million. March 16, 2000 - Alcatel and Convergence Communications Inc. Announce Plan to Build Next Generation IP Networks in Latin America - Three Year, $175 Million Project Encompasses Networks in 6 Countries - Alcatel to Arrange Vendor Financing for Convergence Communications for Project February 2, 2000 - Convergence Communications, Inc. Selects Intershop E-Commerce Hosting Technology - CCI to Use Intershop ePages Platform to Provide Business-to-Business Solutions Hosted at CCI Data Centers January 19, 2000 - Convergence Communications, Inc., Acquires Two Large Data and Internet Service Providers - International Van, S.A. de C.V.: Mexico's Second Largest Data Provider and GBnet Corporation: Central America's Largest Data and Internet Service Provider December 6, 1999 - Convergence Communications, Inc., Secures Total Financing Of $109.5 Million in Private Equity and Credit Facilities - U.S. Provider of High-Speed Broadband Services to Latin America Will Fund Further Infrastructure Enhancements in the Region - An investor group consisting of Telemática EDC, C.A., TCW/Latin America Partners, LLC, FondElec Essential Services Growth Fund, L.P., Internexus S.A., the International Finance Corporation and Glacier Latin-America Ltd., participated in this round.   Read on   © World INvestment NEws, 2001. This is the electronic edition of the special country report on Guatemala published in Forbes Global Magazine. June 11th, 2001 Issue. Developed by AgenciaE.Tv