BOGOTA – IFX Corp. has taken the early lead in the race to establish the first regional Internet service provider network for Latin America by signing agreements to purchase ISPs here, in Venezuela and four other nations.
The Chicago-based company plans to build its network by purchasing existing ISPs and starting ones in regions that lack an infrastructure. It is currently completing due diligence for the purchase of Compuserve de Colombia and International Connection Service of Venezuela.
Late last year, the company formed a joint venture with International Technology Investments to provide Internet services in Latin America and purchased a 25 percent stake in Telecom.Net, an Internet software company targeting Latin America.
IFX seeks to establish a presence in the smaller markets first and will not turn its attention to Brazil until the third quarter at the earliest, said president and CEO Joel Eidelstein.
America Online, meanwhile, has formed a joint venture with South American media giant the Cisneros Group and will target Brazil, Mexico and Argentina first. AOL plans to launch its ISP network in at least one of those countries by the end of 1999.
IFX will change the name of Compuserve de Colombia upon completion of the purchase to avoid confusion with the Compuserve brand AOL will market to Latin America.
Internet accounts in Latin America are expected to grow by 90 percent and large business accounts by 149 percent in 1999, according to International Data Corp.
The ISPs IFX is looking to acquire are seeing 5 percent to 20 percent monthly growth Eidelstein said. The Cisneros Group expects the region to see double-digit growth in computer penetration.
IFX will build account holders by targeting this growing base of computer users. Unlike in the US, computers sold in Latin America are not pre-installed with ISP software.
IFX will provide free CD-ROMs to computer and software makers and retailers that can be bundled with computer purchases and will pay distributors a residual fee based on account openings. Each CD will have a printed code that the user is prompted to enter to establish Internet service.
IFX will target existing computer users through traditional advertising channels with incentives such as free services and free Web hosting.
Its branded ISP network will be promoted with print advertising in the business and hi-tech sections of newspapers and handout distribution and kiosks at “supermalls.”
Eidelstein said direct mail distribution is not an option due to the lack of reliable postal service. IFX tested telemarketing but was not convinced of its effectiveness.
To reach the BTB market, IFX will employ a sales force to install access lines and cross-sell Internet services to the 15,000 Telecom.Net users in Latin America.
The estimated 5 million computer users in the region with Internet access can now receive regional content from Star Media, Yahoo en Espanol and Yupi with AOL soon to follow with nation-specific content. As it builds a user base, IFX will create a personalized default page and try to develop into a portal with e-commerce links.
Cost issues inherent to the region must be resolved, however, before the Internet and e-commerce can take off. Users are charged by the minute for Internet access.
Taxes and fulfillment costs make buying online prohibitively expensive right now, but Eidelstein predicts those barriers will be overcome as consumer demand picks up. n
