CommScope well-positioned to take advantage of fiber growth, analysts say

CommScope is garnering interest from analysts in the wake of its acquisition of TE Connectivity's Broadband Network Services (BNS) assets, which may put it in a stronger position to take advantage of the fiber business that will be driven by the growth of wireless data.

Wall Street research firm BTIG last week initiated coverage of CommScope at a $41 target with a buy rating. Analyst Walter Piecyk said both of CommScope's reported revenue segments, mobility and connectivity, are returning to growth.

"The Connectivity segment represents 60 percent or $3 billion of revenue largely as a result of the expansion of optical solutions from the acquisition of BNS. Mobility represents the other 40 percent and will be driven by the densification of wireless networks and the proliferation of indoor wireless systems, globally," Piecyk wrote in a research note.

Wells Fargo shared that optimism, saying that an improvement in U.S. wireless spending, fiber strength and BNS synergies will improve CommScope's prospects over the next few years.

CommScope CTO Morgan Kurk echoed those sentiments during an appearance this week at the Wells Fargo Connectivity and Convergence Symposium. Kurk agreed that CommScope's BNS acquisition strengthened its fiber business.

Kurk was careful to clarify that CommScope doesn't actually make the glass needed for fiber optics, but instead jackets it, weather-proofs it, and, most importantly, adds connectivity at both the headend and out to an FTTX demarcation point.

He said the rise of dual purpose fiber installations -- meaning, fiber for both direct users and for cell site backhaul -- is a key goal of CommScope customers like AT&T.

In regards to those fiber installations, Kurk said there is a growing movement to take the field installation out of putting connectors on glass. He said that CommScope is now using a technique called indexing that allows it to terminate fiber in the factory, so that installers can do breakouts in the field and make adjustments with a pretested product, thereby making fiber deployments easier for installers.

Elaborating further on CommScope's opportunities in wireless, Kurk said Cloud-RAN (C-RAN) is a big market segment because, as carriers start to combine baseband processing for 10 to 100 cell sites, fiber connectivity becomes important in order to supply high-speed connections among all those points.

Kurk also pointed to the wireless densification push as another big opportunity.

On the tower, Kurk said CommScope can add new antennas, and that means more capacity will be needed back to the core -- which again relies on fiber. As far as metrocells (or small cells) are concerned, Kurk said they are good for offloading capacity from macrocells but need to be connected back on the same fiber route to avoid interference. In addition to handling fiber backhaul for metrocells, CommScope can also assist with cabinets, installations, and power conditioning.

For more:
- read this BTIG research note (sub. req.)
- see this Barron's post
- listen to this webcast (reg. req.)

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