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‘Infrastructure, technology are agnostic to politics’ – DigitalBridge’s expansion plans

'Infrastructure, technology are agnostic to politics' – DigitalBridge's expansion plans unabated

With over US$48bn in total assets under management, DigitalBridge is one of the global digital infra investment funds most committed to Latin America. It has a portfolio of regional companies with operations in Brazil, Chile, Peru, Colombia and Mexico, and projects under development in several of these markets, particularly in the datacenter segment.

Since 2020, DigitalBridge has controlled Brazil’s Scala Data Centers, which was turned into its datacenter portfolio company for Latin America and is developing a set of projects in Brazil, Mexico and Chile.

Scala was DigitalBridge’s second investment in Brazil and fourth in Latin America, after acquiring cellular tower companies Highline do Brasil in 2019, Andean Telecom Partners in 2017 and Mexico Telecom Partners in 2013.

Last February, DigitalBridge added yet another company to its regional portfolio, with the acquisition of Chilean fiber telecom operator Mundo from Linzor Capital Partners.

To support the group in its new growth cycle in the region, the company announced Bernardo Vargas Gibsone as its new managing director and head for Latin America. 

The executive most recently served as CEO of Colombian power group ISA, which has operations in various countries in the region. At DigitalBridge, Vargas Gibsone will lead a team of over 4,000 employees across the region.

In his first interview since taking on his new position, Vargas Gibsone talks about what he expects for the future of the group in the region and overall investment perspectives, with three new countries on the radar.

BNamericas: What are your priorities and objectives as head of DigitalBridge for Latin America?

Vargas: First of all, I’m very excited to finally have finished this six-month process after leaving ISA in January. I wanted to make sure I was joining a group that shared, let’s say, a philosophy that I nurture about the corporate world, but that was also at the forefront of issues that occupy the world agenda. Digital infrastructure is one of these.

Without digitization, remote connectivity cannot be achieved. Without digitization, without adequate digital infrastructure, many of the modern things in the world from which I come, which is the world of electricity and highways, wouldn’t be achieved.

The second thing is that DigitalBridge is a global group, with headquarters in Boca Raton and offices in New York, Los Angeles, London and Singapore, and above all it has a vocation for global growth.

The third point is that this is a group still relatively small compared to the large infrastructure funds worldwide, which also gives me a need to push for its further growth. Which is what I want to do.

And finally, at ISA I was one of the great pushers to position the group in the world of ESG. This is a world that DigitalBridge is equally committed to. It is committed to decarbonization. There are companies in the group’s portfolio that are already carbon neutral. It also has the concept that with digital connections, the most neglected, poorest communities can be reached. And it is a group interested in complying with all governance principles, from ethics to conforming with standards to us to be leaders in this.

BNamericas And from an operational or business standpoint? 

Vargas: Latin America has a significant amount of investment from DigitalBridge. In Brazil there is about US$2bn being invested and in the other countries of the region, Chile, Peru, Colombia and Mexico, there’s also a significant amount, more than US$1bn. 

This is an interesting base point to work from and there’s still a lot of room to grow. The group’s companies in Brazil, Highline and Scala, for example. Highline is already expanding to other countries in the region, Scala already has a datacenter in Chile and projects elsewhere. There’s a lot to do in Latin America.

I’m not going to be involved in the day-to-day of the organizations. That’s not necessary because the portfolio companies already have quite a dynamic management that knows the business very well. I’m simply going to act as a ‘facilitator’, so that there are the best conditions to grow in Latin America, as someone opening bridges for public-private talks, for additional contacts that allow us to grow and for ideas that allow us to have alternatives of more interesting growth.

I believe that the digital world is increasingly influenced by the electrical world, and vice-versa. Electricity is one of its most important inputs in the world of datacenters.

It’s a world that I knew at ISA. I want to bring my knowhow to understand what can be done to complement the digital business.

BNamericas: Both globally and regionally, the core of DigitalBridge’s portfolio is datacenters. There are towers, fiber, but the main business is datacenters. Now, however, Highline is growing in importance, DigitalBridge bought Chilean fiber operator Mundo, for example. Is there a stronger portfolio diversification strategy beyond datacenters in the region? Is this orientation from the headquarters?

Vargas: The DigitalBridge group was originally a very successful cell tower business. Today it’s a diversified business that includes datacenters, small cells and obviously, as a result of acquisitions such as Mundo’s, now fiber networks too.

It’s of the utmost necessary to have sufficient business diversification in an infrastructure platform. I’m a fervent devotee of a diversification model. In this regard, the acquisition of Mundo makes perfect sense.

Just last week I was in Chile meeting with Tim Purcell, the manager and owner of Linzor, who is very happy with the evolution of what they started.

I think that what DigitalBridge already has in Chile, Peru and Colombia with ATP [Andean Telecom Partners] is very well complemented by what comes with Mundo. And I believe this is also part of DigitalBridge’s concept of having a diversified platform, so that in difficult times for one particular sector it can continue to be as successful as it has been, attracting capital from the largest investment funds in the world.

That’s why today this group manages nearly US$50bn in its digital infrastructure portfolio, guided not only by a co-investor but also by the largest global partners.

BNamericas: Does it make sense to think of more concentrated geographical operations: Scala and Highline more focused on fibers, towers, datacenters and small cells in Brazil on the one hand, and Scala, ATP, Mundo in the Andean market on the other, for example?

Vargas: I don’t believe in that division between the Latin Spanish-speaking world and the Latin Portuguese world. I believe that there’s an increasingly stronger regional integration of Brazil with the other Latin countries. In fact, at ISA we did it wonderfully. There was constant interaction between human talent from Spanish-speaking countries with Portuguese-speaking countries and also vice versa. We had Brazilian talent in Medellín, Peru and Chile.

The vocation of DigitalBridge’s business in Brazil is clearly to grow there. The potential for that is great. These companies are already big. Highline already has 20,000, 30,000 towers, and Scala has a good portfolio that’s growing fast. 

It’s natural for both companies to grow in other countries in the region. And if there are companies in the DigitalBridge portfolio from other countries that don’t generate conflicts of interest for the group in Brazil, I think it could also happen on that side as well.

BNamericas: CEO Marc Ganzi said in the Q2 investor call that the most adverse macroeconomic and stock market scenario favored ‘buyers’ like DigitalBridge, due to the revaluation of the prices of assets to be acquired. What’s your view of the region? Is there a more favorable scenario for acquisitions and can we expect new ones in the short or medium term?

Vargas: We’re in a macroeconomic environment in which we have to be careful.

In Latin America there’s been a very significant rise in consumer prices, which has pushed up interest rates and depreciated currencies. We must have this careful vision in our portfolio. And also know when it’s time to get in and get out. But the group’s vocation, as Marc said, is exactly that.

BNamericas: Where do you see opportunities in digital infrastructure in Latin America in a broader sense?

Vargas: There are two countries that have enormous potential, which are caught in political vicissitudes, however, which are Venezuela and Argentina. 

They are countries, especially Argentina, with a high income per capita. And that means there’s a lot to do there. We’re looking at it carefully. 

We also want to assess alternatives in Uruguay. Uruguay is a smaller country, but it also has high per capita income and we want to see how to support this country in terms of infrastructure.

And then there’s Ecuador. Ecuador is a country we’re starting to look at. From a regulatory point of view, Ecuador had some peculiarities that make it difficult [to invest there].

Those three countries, Uruguay, Argentina and Ecuador, are something that we’ll be looking at. 

First obviously Ecuador and Uruguay, which is where the most obvious possibilities can be seen. But we’d be very interested in getting into Argentina in the future and, hopefully, to Venezuela.

BNamericas: What’s necessary for that to happen?

Vargas: There are geopolitical issues, issues with the internal management of the economy, that need to happen to give us more tranquility.

But in any case, we’re going to be watching those countries with a very keen eye to see when it’s the right time to enter.

I’d also add that infrastructure and technology are agnostic to ideological or political colors. Governments on the left, as well as those on the right and the center, are going to need to focus on growing digital assets to provide more affordable alternatives to the entire population in education, health, etc. We at DigitalBridge hope to be one of the catalysts for that important growth that needs to happen.

I was in Mexico a few weeks ago and in Mexico there’s a desire from President [Andrés Manuel] López Obrador for digital growth in the country’s remote areas that has, let’s say, a proximity with what Mexico Telecom Partners does, which is DigitalBridge’s portfolio company in Mexico.

So, insofar as the government injects resources into these models to digitally reach communities that aren’t well connected, we come in to provide support with what we know, which is to connect with towers, with fibers and, obviously, hopefully in the future, with datacenters.

BNamericas: Could MTP play that wholesale role, with CFE-TEIT, Internet para Todos?

Vargas: Sure. For that to happen, a very close partnership with governments is necessary, because obviously in the interconnection of remote areas there are areas that aren’t financially viable and these types of agreements are essential for us all to win: the government, the companies and especially the communities.

And I’m talking not only about MTP, but about carriers like Telmex, AT&T and others.

BNamericas: What are the group’s regional investment projections?

Vargas: I’m clear about what we’ve invested, which are the amounts already mentioned, but the investment pipeline is still something that I have to start looking at more carefully.

We hope to carry out planning meetings soon to have the exact figures and align plans. 

BNamericas: We were talking about datacenter projects, acquisitions, Mundo, and all of that in a year with pivotal elections in Colombia, a complex constitutional process in Chile and also polarized elections that are about to take place in Brazil. Will the projects go ahead regardless of the political winds?

Vargas: If an infrastructure company in Latin America doesn’t understand that there are geopolitical variations in the countries, then they shouldn’t be here. 

I was a witness at ISA when I joined the board, in 2012, 2013, when Dilma [Rousseff, former president of Brazil] modified the electricity contracts in Brazil. There were voices at ISA saying “hey, we have to leave Brazil, this isn’t acceptable”. But we stayed. The same thing has happened with changes of government in different countries.

What I bring is experience to DigitalBridge so we can talk to our partners, we can talk to those who invest, so that they understand that the vocation of Latin America isn’t short-term. It requires having a more medium-term or long-term view. And if that’s the case, there are very interesting and important possibilities for profitability to be explored.

That doesn’t mean that we don’t have a clear commitment in Latin America to return capital to investors in a very profitable way. But it’s important that those of us who invest in the region understand that these vicissitudes will be here. We should be aware of them and deal with them in the best possible way.

That’s why I also believe, as I said before, that the world of digital infrastructure is much more agnostic to political processes, because all political lenses need digital infrastructure.

Furthermore, all Latin American governments have large fiscal needs and require partners like DigitalBridge to help them invest in their digital growth.

I’m confident that this message will resonate well with [new] governments coming in, so that they also become partners in a common and shared purpose: The aim of connecting the people in the different countries, especially those who have the greatest need for education and health in more remote areas.

Read More: ‘Infrastructure, technology are agnostic to politics’ – DigitalBridge’s expansion plans

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