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Brazil’s Economic Struggles Prompt Arycom to Pursue New Mobility Verticals

By Caleb Henry | April 23, 2015
Svante Hjorth Arycom

Svante Hjorth, CEO of Arycom Communications. Photo: Arycom

[Via Satellite 04-23-2015] Arycom, one of the leading mobile satellite communications companies in Brazil, is reprioritizing its focus on different verticals as the Brazilian economy experiences a slump. Volatility of the U.S. dollar in relation to the Brazilian currency, the real, has affected the company, as demand in some sectors slows and budgets contract. Still, Arycom CEO Svante Hjorth believes there are several strong opportunities Arycom has found in the midst of this economic turbulence.

“In general, yes, the Brazilian economy has suffered lately. There has been and continues to be political instability in Brazil; there have been losses due to the depreciation of the real and the general slowdown of the economy. A lot of companies are struggling, but that doesn’t mean that there aren’t still niches that are growing,” Hjorth told Via Satellite.

One of those niches is the Brazilian agribusiness. Though Hjorth acknowledged this sector has suffered losses in recent years, he highlighted specific areas, such as the grain business, that are starting to rebound and show renewed demand for connectivity. The energy sector has seen trying times as well, with a number of foreign companies opting to leave the nation, but Hjorth notes production is still growing and that this is another area Arycom is focusing on today.

The aeronautical market is also a burgeoning focus for Arycom as In-Flight Connectivity (IFC) services grow in popularity within Latin America. The company is expanding its portfolio with solutions for business aviation in particular.

“Arycom has increased its sales significantly over the last few years in aviation. We have entered into new partnerships and increased our portfolio and reach within aviation. That has been a good investment for us,” Hjorth said.

One market that Arycom has waned in recently is the government space. Though Brazil has prioritized bolstering its military communications capabilities, Hjorth said satcom has “become a commodity” today. He remains leery of this market’s potential as new players grow in number.

“Arycom used to have a very high penetration of the government market, but this market is not as interesting to us now as it used to be, mainly because it has become very, very price oriented. Customer support and service quality are no longer the key drivers for the government, price is. In the government’s online public bids, for example, bidders are not even pre-qualified, so providers without the required authorizations participate in the bids, drive the price down to a minimum and are then disqualified, passing on to the next in line. With extremely low margins, local contracts and the volatility of the dollar, this has become a high-risk game for the service providers,” Hjorth explained.

Despite these deleterious economic factors, Brazil still represents a major market for satellite communications. Hjorth anticipates mobility will remain one of the country’s top areas of investment within IT, alongside the cloud. He said several operators in Latin America are creating specific task forces on mobility, such as Machine-to-Machine (M2M), comms-on-the-move (COTM) and emergency backup, among others. Brazil, like many other markets, appears caught up in the surge of newfound Information and Communication Technology (ICT) applications.

“When economies are down companies look to reduce their spending, and one way to reduce spending is investment in mobility. There is always an opportunity even in times of slowdown. If you look at the Brazilian connectivity market as a whole, it is actually predicted to grow by some 5 percent in 2015,” said Hjorth.

With several satellite operators planning High Throughput Satellite (HTS) capacity for Latin America, Arycom expects prices will come down due to increased competition. Hjorth said the company is working on several new projects, such as streaming video solutions over satellite and cellular networks, and has identified opportunities within offshore, mining, media and other markets. Arycom furthermore has plans to develop into a regional player for mobile satellite communications in the Americas. The company opened a subsidiary in the United States in 2012, and is pushing out into other countries in Latin America.