CenturyLink (NYSE: CTL) may not provide its own wireless services, but with a fiber network connected to over 16,700 towers in its footprint the telco continues to be a big enabler of wireless operators.
Ewing (Image source: CenturyLink)
During the second quarter, CenturyLink built out fiber to an additional 1,150 towers during the quarter.
But with over 35,000 wireless towers present in its territory, it's not nearly done yet.
Stewart Ewing, CFO and EVP of CenturyLink, said during the Oppenheimer Technology, Internet & Communications Conference that it expects "to build fiber to 4-5,000 towers in 2013 and should end the year with fiber to about 19-20,000 towers."
Being an incumbent telco, CenturyLink continues to see wholesale revenue declines as its wireless wholesale customers migrate from TDM and copper-based backhaul to fiber and IP/Ethernet.
In the second quarter, wholesale strategic and segment revenues fell to $572 million and $910 million, respectively, as declines in copper-based revenue were partially offset by increases in wireless carrier bandwidth demand and Ethernet sales.
"We're experiencing some revenue compression as our wireless customers transition from copper-based DS1 services to fiber-based Ethernet services, but we expect hopefully that, through the growth and demand, the revenue would overtake the compression we're seeing sometime in 2014," Ewing said.
Besides revenue compression, other challenges for CenturyLink's fiber to the tower (FTTT) build out initiative are growing competition and the cost of building to rural areas.
"We lost some towers along the way from some of the CLECs and cable companies that picked up some towers, and some of the towers are in rural areas that it's not economically feasible to build fiber to today," Ewing said.
One cable operator that's been making traction in FTTT market is Time Warner Cable. The MSO, according to a report in FierceBroadbandWireless, has extended its fiber network to over 10,000 cell towers.
From a capex perspective, CenturyLink currently allocates $250 million a year to FTTT projects, which Ewing said will decline over time.
"We don't know what we'll be building in 2014 at this point, but we'll plan to use the capex in other areas to accelerate revenue growth," he said.
Some of those other areas of revenue growth could include new business and even residential customers that reside near the wireless towers.
"We try to design the routes to bring fiber to the towers to where they can serve other needs that we have to in terms of providing fiber closer to business customers and closer to residential customers to provide some of the higher bandwidth services," Ewing said.
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