During a second quarter earnings call last week, Verizon executives stressed the importance of fiber to its long term network plans. CFO Matt Ellis in particular pointed to fiber as a “critical element” to the carrier’s small cell densification and spectrum expansion plans. But after selling its Fios assets in California, Texas, and Florida to Frontier Communications, how might Verizon move forward with its fiber push?
Analysts have some suggestions.
In response to a report from Reuters last week that Verizon is looking into acquiring WideOpenWest Inc.’s Chicago-area fiber network, Wells Fargo Senior Analyst Jennifer Fritzsche noted such a deal would support the theory that the carrier is truly serious about fiber investments. The potential deal also hints that similar transactions with rural local exchange carriers (RLECs) could be coming down the pipe.
“This move could signal that VZ is in acquisition mode for some more fiber assets – or parts of those assets which it currently uses for backhaul outside of its incumbent footprint. Some of the more fiber-centric RLECs (a group which has recently been called the “RLEC WRECK”) could be a part of such a conversation, in our view,” she wrote. “While we expect VZ to be selective in purchases of fiber, checks show it is serious about building much of its fiber on its own. We do think VZ will be opportunistic in select markets outside its footprint, but we also believe it remains committed to deploying its own plant.”
On the acquisition front, Fritzsche pointed to Consolidated Communications Holdings and Cincinnati Bell as the most fiber-focused acquisition candidates. But she added the decision to build or lease will likely be made on a market-by-market basis to capture the best economics.
Statements from Ellis on the earnings call lend support for the idea that Verizon will use a varied approach to fiber deployments.
“The way that we’re going to add that capacity will be probably through a combination of buying fiber that already exists – if it’s the right type of fiber – (plus) we can build fiber, and we can certainly lease,” Ellis said. “We were doing that on top of some of the assets we already own, and add in the XO, those fiber metro rings earlier in the year give us the base on which we will continue to do some of that. So fiber will continue to be very important the higher we build the network, not just for wireless but also various wireline applications, including smart city deployments.”
According to Recon Analytics’ Roger Entner Verizon will be looking to fiber for backhaul services only, rather than using them to return to offering Fios-like services. The latter, he said, would be a huge repudiation of its strategy in the aforementioned Frontier deal.
BTIG’s Walter Piecyk also weighed in, noting that Verizon plans to focus its investments in the second half of this year on fiber and small cells. Piecyk reported Corning and Prysmian will likely be the primary beneficiaries of that spend, but said most fiber suppliers will see a benefit from those investments.
Corning’s share of the pot is reasonably well known. Verizon earlier this year announced a $1.05 billion deal with Corning for up to 12.4 million miles of fiber per year from 2018 to 2020. More on that here.
Filed Under: Infrastructure