CenturyLink's Ewing: Fiber-based backhaul revenue will start to surpass displaced TDM circuits by the end of 2014

CenturyLink (NYSE: CTL) may finally be seeing light at the end of the legacy to next-gen Ethernet-based fiber to the tower (FTTT) revenue migration.  

During the 42nd Annual J.P. Morgan Global Technology, Media and Telecom Conference, Stewart Ewing, CFO and EVP of CenturyLink, said that FTTT revenue is rising up to a stage where it is starting to surpass legacy losses from wireless operators shutting down their TDM-based circuits.

"If you look at our wholesale business, strategic revenue was almost flat quarter to quarter, meaning that fiber to the tower revenue we're seeing is accelerating to a point where it is covering the DS1s and DS3s that are being disconnected associated with customers moving to Ethernet services," Ewing said.

Such a trend took place in its first-quarter 2014 wholesale segment earnings where it ended the period with over 19,200 fiber-connected towers, up nearly 24 percent from the first quarter of 2013.

By the end of 2014, CenturyLink expects to have built out fiber to between 21,000 and 22,000 towers. The 32 percent of the towers that won't have fiber to them are in rural areas and will not have fiber to them for a long time, if ever.

While Ethernet-based FTTT services are its growth engines, strategic revenues remained flat year-over-year at $570 million as increases in wireless carrier bandwidth demand and Ethernet sales were offset by declines in copper-based revenue.

While CenturyLink expects revenue compression from TDM disconnects to continue, much of that process will be completed by the end of 2014.

"We still expect some to continue, and we would hope that by end of this year we would have been through most of that and be at the point that the revenue for the fiber-based services--at least to those towers that they are connected to--is exceeding the copper-based revenue we have," Ewing said.

Ewing added that "we think the backhaul revenue will bottom in 2014 and start to de-accelerate."

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