NORTHLAND AND GEIB FIND OPPORTUNITY, REWARD IN SOUTH AMERICA
When Patricio Northland, XP-66 (97), asked executive program
classmate Doug Geib to join him in a Latin American telecommunications
venture in 1996, Geib didnt hesitate for a second.
He laughed at me and said, Youre crazy, its a lemon, Northland
recalls. Geibs reaction didnt stop Northland, who in 1996 joined
the ailing InterAmericas Communications Corporationnow known
as FirstComcrafted a business plan, and eventually persuaded
Geib to leave his partnership at Ernst & Young for a position
as chief financial officer at the firm. Together the duo have
built a $163 million, 250-employee multinational firm that offers
high bandwidth telecommunications services to customers in Chile
Northland admits that FirstCom didnt look like much of a company
in 1996 when a colleague approached him about taking it over.
A two-year-old entrepreneurial venture, FirstCom had no money.
The companys board didnt want FirstCom to fold, and Northland
seemed an ideal candidate to engineer a turnaround. He had considerable
telecommunications experience, having founded and run Americatel,
a Latin American telecommunications company, in the early 1990s.
In 1993 he engineered a joint venture between Americatel and Entel,
Chiles major long distance operator, and by 1996 he had just
sold his interest in Americatel. I reviewed the [FirstCom] material
and decided there was a big opportunity, especially in Peru, where
there is a monopoly of communications and deregulation was fairly
new, Northland says. I decided I wanted to be the underdog,
to fight the big guys.
The big guy, in this case, was Telefonica, a Spanish-owned telecommunications
corporation that has dominated the market in many South American
Northland knew Geib from the GSB, where they were completing their
course work in the executive program. A partner at Ernst & Young
in Cleveland, Geib had almost two decades of finance and accounting
experience that included raising capital and selling private companies.
It was just the kind of expertise Northland needed to help resuscitate
and grow the struggling FirstCom, but Geib was not easily sold
on the project. I knew how far away we were from fundraising,
Geib says, and as good of a salesperson as Patricio is, I thought
he was really underestimating what needed to get done in order
for the company to raise capital and be successful.
Despite his initial misgivings, Geib visited FirstComs Miami
headquarters, spent some time with Northland, took a long look
at the business plan, and ultimately decided to take the risk.
I really liked what I heard when I went down there, what Patricio
told me about his vision, Geib says, and I knew this kind of
opportunity might not come up again. So I started to go through
my own decision model. I knew that if I ever left Ernst & Young,
it would have to be for a more entrepreneurial business, which
this is. And I wanted it to be in an emerging industry, which
this is. He had been discussing the possibility of an international
assignment with Ernst & Young, but adds with a laugh, Florida
looked better than Singapore to my wife.
Geib signed on. The first order of business was to upgrade the
companys public listing from OTC to Nasdaq in order to gain more
credibility. Geib and Northland began working closely with a New
York investment bank that promised to do a high-yield bond offering
for $100 million; however, FirstCom ended that relationship after
four months when it became apparent that an offering was not going
to be completed. Undaunted, Northland and Geib engaged Union Bank
of Switzerland, put on a road show, and raised $150 million in
a high-yield offering. Luck was on their side: they closed the
transaction just a few days before a major crash hit the market
in October 1997.
Northland and Geib have split the past two years between the companys
Miami headquarters and its Chilean and Peruvian operations, selecting
and training local management teams and overseeing operations.
The on-site work in Latin America has brought some surprises.
Northland, who is Chilean, was familiar with the business culture
of Latin America. Geib, however, says he operated within a U.S.
paradigm and sometimes had to adjust the definitions and ideas
he had previously worked by.
I was sometimes surprised at how different the cultures were
between the U.S. and Latin America. Not in a good or a bad way,
just different, Geib says. I came from a culture at Ernst &
Young that consisted of professionals who were highly trained,
very disciplined, and worked from a common framework, Geib says.
As a result, they were greatly empowered to make the right decisions.
Although I generally believe in giving employees a significant
amount of leeway in making decisions, I also learned that such
empowerment requires employees to have a common understanding
of acceptable boundaries and enough training to know when one
needs to ask for help. At FirstCom, for example, written policies
were necessary to ensure that employees understood the guidelines
for U.S. publicly traded companies, such as compliance with the
Foreign Corrupt Practices Act. On one hand, he says, FirstCom
is an entrepreneurial company, and on the other hand they have
found it necessary to maintain an extremely controlled environment
in terms of written policies and procedures.
Another challenge has been disseminating information about the
company. Weve had to make more of an investment in educating
Wall Street and other people as to what were doing as a company,
Geib says. The firm has created an aggressive investor relations
program that generates and publicizes company research. When
youre big like Coca-Cola or CISCO theres a lot of good information
available. But for the smaller cap companies like ourselves, theres
nothing out there. Patricio came up with a new formula that says
the valuation of the company is market perception plus net present
value. Its another way of saying that market efficiency is different
for a firm our size.
They must be getting it right, because FirstCom is on solid ground
with projected 1998 revenues of approximately $14 million, an
amount that is expected to triple in 1999. They are one of the
few companies licensed to compete with Telefonica in Peru, and
they recently acquired a long distance carrier in Chile. Within
the next five years they expect to operate in six countriesChile,
Peru, Colombia, Brazil, Argentina, and Venezuelaand they are
extending their reach into the rapidly growing field of Internet
services like electronic commerce and voiceover Internet protocol,
which sends voice calls over the Internet to be received by a
The business customers in Latin America have a significant need
for state-of-the-art, fiber optic based telecommunications services
in order to stay competitive with the rest of the world, Northland
said, assessing the regions potential growth in telecommunications.
Most of the incumbent providers have been slow in developing
these services because they have been so focused on closing the
gap in installing a sufficient number of access lines to the numerous
residential customers. This creates a significant opportunity
for new telecommunications providers like ourselves because we
do not have to redesign or transform an existing legacy of copper
And while the company is still relatively small, Northland has
big plans. With a blend of good fortune and key acquisitions,
I see the company becoming a second-tier telecommunications company
competing with incumbent entities in every [Latin American] country,
he says, adding with a laugh, and in 10 years, youll probably
read in the paper that weve taken over WorldCom.