In a move that should help Miami-based consumer access provider Tutopia attain its goal of breaking even by the second half of this year, the firm recently scored $5 million in a funding round from parent company IFX Corp. and private equity firm UBS Capital Corp.
IFX contributed $3.2 million, and UBS Capital has thrown in $1.8 million, the latter through its $500 million UBS Capital Americas III LP. Last June, the two firms together invested approximately $45 million in Tutopia.
Charles “Chip” Moore, a partner at UBS Capital Americas, said that Tutopia differs from other free ISPs right now in Latin America in that it is not spiraling downward into a fiscal abyss.
“Tutopia grows by 100,000 subscribers a month,” Moore said. The company has roughly two million subscribers today.
Although Brazilian Internet group UOL believes the free ISP business is not feasible (it shut down operations of its own free ISP, Netgrautuita, last year), Tutopia itself states that it is a “marketing and solutions provider” that uses free access to acquire new customers. As such, the company obtains income through advertising and direct mail, along with some fee-based access and revenue-sharing agreements with certain carriers. Now Tutopia offers fee-based access in certain markets in Columbia, Mexico and Brazil. Officials at the company could not be reached for comment by press time.
Moore said Tutopia asked 14,000 subscribers in Mexico if they would pay for access and 30% agreed, something he views as positive.
In addition, Moore said he believes voice services and direct marketing have a great future in Latin America and that Tutopia is poised to take advantage of “deregulation in the voice communications market.”
“Certain countries could provide international long-distance through voice-over IP,” he said, noting that while this is still illegal in Mexico, “it’s not in most other markets.” He added in that, in the future, Tutopia will look “less to advertising and more to communications” generate its revenue.