Adtran rides network installation services wave in Q3, sees recurring trend with CAF-II, vectoring builds

Tom Stanton, Adtran
Tom Stanton, Adtran

Adtran hit a professional services revenue wave in the third quarter as total network solutions revenues grew 63 percent year-over-year to $136.3 million.

RELATED: Adtran finds professional services sweet spot in serving CAF I, II deployments

Likewise, total services and support revenue came in at $32.6 million, which Adtran said was a new record for the company.

Tom Stanton, CEO of Adtran, told investors during the third quarter earnings call that the company is pursuing more service provider customers that are in the midst of their CAF-II builds as well as implementing vectoring to provide higher speed services over their copper networks.  

“Growth is driven by projects and CAF-II is a big driver,” Stanton said during the earnings call, according to a Seeking Alpha transcript. “We expect CAF-II to continue on into next year."

The vendor claims that it has been able to help CAF-II recipients reduce network deployment times in rural markets by 50 percent. In addition to assisting CAF-II providers with network planning, Adtran can address a mix of outside plant (OSP) and inside plant (ISP) issues.

During the OSP planning process, Adtran can help service providers navigate the local town permitting process and install equipment in remote locations. Adtran can also address ISP issues related to wiring a remote terminal cabinet that will house DSLAM or PON equipment.

Adtran’s timing is spot on as a number of large telcos, including FairPoint, Frontier, CenturyLink and Windstream are moving forward with their CAF-II builds, all of which will require network installation and construction capabilities.

Frontier, which had accepted $283 million annually in CAF II support from the FCC, plans to deploy broadband to more than 650,000 high-cost rural locations throughout its current 28-state service area, for example.

While Adtran expects CAF-II to be a large driver for services revenue, the vendor is seeing opportunities to assist service provider customers with their vectored DSL deployments.

CenturyLink may not have revealed what vendors it is using yet, but the telco has set an ambitious goal to reach a large part of its network footprint with 100 Mbps speed using vectoring.

Glen Post, CEO of CenturyLink, told investors during its first quarter earnings call in May that it expects “to be close to 600,000 by year end,” adding that “we're looking at a plan that could reach over 14 million households over the next few years” with vectoring.

Stanton did not specify what customers Adtran is working with on the vectoring side, other than to say it is engaged in a number of projects.

“We expect CAF II to continue on into next year [and] we have fairly large vectoring deployments going on here in the U.S.,” Stanton said. “Based off of what we are hearing and what you are seeing in the press, we would expect that to actually be materially larger next year so I would expect we should have a strong services number in Q4 and I would expect it to actually grow next year.”

Stanton added that more of Adtran's customer base is willing to hand off more of their network installation and management functions to an integrator like Adtran for vectoring and CAF-II deployments.

“I don’t know if it’s a coincidence, but I think probably it has to do with just staffing levels and being able to manage their run rate versus major projects like this,” Stanton said. “But the customer base has been much more open to allowing third-party to go on and do the installations and that’s for both of those. And we don’t see that changing, in fact probably accelerating next year we’ll see.”