Shining star: In the rough-and-tumble world of supplying cell phones to Latin America, Brightstar has bested its competition with a combination of smart selling and cultural savvy

Latin CEO: Executive Strategies for the Americas, Dec, 2001 by Mike Seemuth

LIKE A LOT OF COMPANIES, wireless telephone handset distributor Brightstar Corp. was rattled by the Sept. 11 terrorist attacks that rocked the US--and world--economy But once the smoke cleared, the company saw little evidence that its fast-growing business would be put on hold. One of the biggest Hispanic-owned companies in the US, Miami-based Brightstar aims to get even bigger by dialing for more dollars in its main market, Latin America.

"We're a lot more optimistic in Latin America than in the US," says R. Marcelo Claure, the Bolivian-born CEO and majority owner of Brightstar, a leading distributor of Motorola wireless phones (the brand accounts for about 75 percent of Brightstar's revenue). "We're still looking at our business from a pretty optimistic point of view We have not seen any slowdown in orders from our customer base for the fourth quarter, which tends to be the most important quarter in Latin America."

Indeed, the company outstripped others when it posted third-quarter income of US$6.7 million, before interest and taxes, on revenue of US$161.5 million--more than double the Latin American earnings of its nearest competitor, CellStar Corp.

Looking farther ahead, users of wireless telecommunication and data networks widely are expected to proliferate faster in Latin America than in most other areas of the world. One major driving force is the high-priced--and frequently low-quality--service provided by monolithic fixed-line networks. Consumer demand for wireless alternatives is gaining in the region largely because "there is still a monopoly of fixed lines in many Latin American countries," Claure says.

Brightstar has grown organically, and in a hurry Founded in October 1997, Brightstar now has 600 employees--about 180 in Miami, with most of the rest in its Latin American warehouse operations. The company has subsidiaries in Argentina, Bolivia, the Dominican Republic, Mexico, Paraguay, Peru, Puerto Rico, Uruguay and Venezuela.

Brightstar seems to be in the right place at the right time. The wireless share of the Latin American telephone market has been rising faster than the fixed-line share. Last year, for the first time, the number of cell phones in Latin America exceeded the number of fixed-line phones (some 60 million compared to 57 million), reports the Yankee Group, a Boston-based market research firm. For the entire region, Yankee predicts that total wireless subscribers will more than double to 162 million by the end of 2006.

Brightstar is also riding the outsourcing trend in the industry In years past, network operators in Latin America typically bought wireless phones directly from Motorola and other manufacturers, and shipped them to retail outlets. This exposed the service providers to distribution-related risks such as currency fluctuations, bad debts and technological obsolescence. "We have changed that paradigm," Claure says. His business takes wireless network operators out of the business of phone procurement and distribution.

There are two basic types of Brightstar customers: wireless network operators and wireless handset retailers. Brightstar's customer base includes about 60 wireless network operators in Latin America--including Comcel in Colombia, Cable and Wireless in Panama, and BellSouth in Ecuador--in addition to hundreds of retail stores.

Brightstar acts as the middleman between these outlets and the manufacturers. Working closely with wireless service providers to meet their technical specifications, Brightstar buys handsets from Motorola (as well as from Nokia, Ericsson and other manufacturers) and ships them to these providers and their authorized retailers in Latin America, providing just-in-time inventory deliveries and other logistical services.

"That has allowed the carriers to focus on their business. Their core business is to sell air time to the end user," Claure says. "It's a lot better than leaving the burden to them to do all of the importing, all of the logistics, all of the distribution."

The business plan evidently is working. Brightstar's revenue shot up from US$73 million in 1998 to US$140 million in 1999 to US$355 million in 2000. "This year," Claure says, "we should break the US$600 million mark."

Nonetheless, margins remain razor thin. Net income has risen, from US$938,000 in 1998 to US$7 million in 2000, but that total is still less than 2 percent of gross revenue. The company expects to earn US$8.9 million this year.

Though privately held, Brightstar discloses its sales and profits as though it were a public firm, which it may be someday Profitable "since week one," Brightstar has been interviewing investment bankers as a first step toward a possible initial public offering. "So far, we have financed the company primarily with bank debt," Claure says. "Our intent is to go public by the end of this year, or the beginning of next year."

The company has competitors in Latin America, but they have done little to impede its progress. Two of Brightstar's closest rivals are publicly held CellStar Corp. of Texas and Brightpoint Inc. of Indiana. Both are older than Brightstar and generate more annual revenue, about US$2 billion each. But neither specializes in Latin America, as does Brightstar, and both entities have suffered setbacks in the region in recent years.