AT&T, Verizon wireless moves will require incremental wireline deployments, says Dycom

While Dycom did not name Verizon specifically, it did say that the company will be able to accommodate a large fiber network being built by one of its largest customers.

Dycom expects that as large service providers like AT&T, Verizon and others move forward with their 4G expansion and future 5G wireless plans, these networks will require complementary wireline networks.

Steven Nielsen, CEO of Dycom, told investors during its fourth-quarter earnings call that a parallel wireline investment cycle is fundamental to applications enabled by fully converged wireless/wireline networks.

“Emerging wireless technologies are now beginning to drive significant incremental wireline deployments,” Nielsen said. “It’s clear that a complementary wireline investment cycle will be required to facilitate what is expected to be a decades-long deployment of converged wireless/wireline networks.”

RELATED: From CenturyLink to Verizon: Tracking wireline telecom earnings in Q1 2017

Verizon, one of Dycom’s largest customers, is building out a large fiber network to accommodate its current 4G and later 5G networks as well as business services growth. In April, Verizon signed a $1.1 billion, three-year fiber and hardware purchase agreement with Corning, enhancing capacity to support a next-generation fiber platform that will support all of the company's businesses.

Later, Verizon signed a $300 million agreement with Prysmian, which will provide 17 million kilometers (10.6 million miles) of ribbon and loose tube cables.

Already providing construction and integration services to Verizon, Dycom is in a prime spot to gain more business from Verizon as the company proceeds with what is arguably one of the largest fiber expansions in recent history.

While Nielsen did not name Verizon specifically, he did say that Dycom will be able to accommodate a large fiber network being built by one of its largest customers.

“Notably, one industry participant has begun to invest in the wireline investment required to enable fully converged wireline/wireless networks,” Nielsen said. “The industry effort required to deploy these networks will broaden our set of opportunities.”

However, Nielsen did confirm that Dycom is a participating contractor in the new fiber build, but could not provide further details.

“What we can say about Verizon’s One Fiber initiative is that we’re a participant in the program,” Nielsen said. “Beyond that we’re bound by a non-disclosure agreement as to the specifics of our involvement.”

Besides wireline/wireless network projects, Dycom continues to participate in wireline operators’ build-out of 1 Gbps FTTH-based networks. AT&T, for example, has installed fiber into 5.5 million locations across 57 metro markets. The service provider has set a goal to extend fiber to 12.9 million homes, a number it may surpass, by 2019.

Here’s a breakdown of Dycom’s key metrics:

  • Customer revenues: Dycom’s top five customers in each period represented 75.7% of revenues in the fourth quarter compared to 74.1% in the same period a year ago. AT&T remains Dycom’s largest customer, making up 21% of its revenues. Notably, Dycom saw strong organic growth with CenturyLink at 52.8% and Comcast at 44.9%.
  • Financials: Dycom reported contract revenues of $780.2 million, compared to $789.2 million for second quarter 2016. Contract revenues for the quarter ended July 29, 2017 grew 4.6% on an organic basis. On a GAAP basis, net income was $43.7 million, or $1.38 per common share diluted, for the quarter.
  • Financial Outlook: Looking towards the first quarter of fiscal 2018, Dycom expects total contract revenues to be in the range of $715 million to $745 million.