CommScope's Vantiva deal a 'net positive' for DOCSIS 4.0 deployments: Dell'Oro

CommScope has long been looking to offload its Home Networks business and it looks like the company finally has a buyer in Vantiva. The vendor just inked a deal to sell the division to Paris-based Vantiva in exchange for a 25% stake in the company and an earnout of up to $100 million. Dell’Oro Group VP Jeff Heynen said the deal bodes well for the cable industry.

“Obviously CommScope has been trying to move this division for a while and this is probably the best of all outcomes not only for both companies but also for the industry,” he said. “There’s just been so much back and forth on what DOCSIS 4.0 looks like and I think this takes one variable off the table.”

CommScope’s Home Networks division was created in 2020 and focuses on customer premises equipment. Think broadband gateways and set-top boxes. In April 2021, CommScope announced plans to spin off the unit into a standalone entity but delayed the play in 2022. Now, it’s getting rid of it entirely.

Vantiva, formerly known as Technicolor, itself offers an array of gateways, extenders and video hardware and software and generated €2 billion in sales in the 12 months to June 2023.

Heynen noted that CommScope and Vantiva are separately the dominant players in CPE for cable giants Comcast and Charter. But while both operators are moving ahead with DOCSIS 4.0 rollouts, there’s still some debate about what the modems will look like at the component level – specifically whether they will include both full duplex and extended spectrum modules or just one or the other. The marriage of the two major CPE vendors will give chip suppliers like Broadcom and MaxLinear “a level of comfort” since they no longer have to negotiate separate DOCSIS development agreements with each vendor.

All in all, Heynen said the deal is likely a “net positive” for the broadband industry.

Two become one

In the 12 months ended June 2023, CommScope’s Home Networks division generated $1.5 billion in revenue. In its fiscal 2022, 53% of sales came from broadband devices such as DOCSIS, fiber and fixed wireless access gateways and modems as well as Wi-Fi extenders and mesh systems. Another 38% of sales were attributed to video device sales.

“For the past 2 years, we have methodically and thoughtfully considered the strategic alternatives for our Home Networks business which would provide the highest value for our shareholders and the best partner to support our customers. In Vantiva, we are confident that we have found the right buyer,” CommScope CEO Chuck Treadway said in a statement. “We see compelling financial and commercial reasons for the combination of these two businesses at this time.”

A large chunk (59%) of CommScope’s Home Networks sales came from North America, with Europe, the Middle East and Africa accounting for another 25%.

But during a call with investors, Vantiva CEO Luis Martinez-Amago noted there is minimal customer overlap between the companies, meaning the deal will help expand Vantiva’s customer base and allow it to access new market segments in new geographies. Specifically, he said Vantiva will have access to eight new Tier-1 customers.

The French company said it expects to reap 100 million Euros in synergies over the course of two years after the transaction’s close through access to economies of scale, the ability to streamline sales and support functions and the adoption of R&D best practices from both companies.

CommScope’s Home Networks business has around 1,400 employees currently. The deal is expected to close in Q4 2023. Martinez-Amago said he doesn’t expect the deal to trigger antitrust action given the market is “very, very fragmented” and there is no risk of even the combined companies exercising dominance.

From CommScope’s perspective, the deal will aid its continued efforts to cut costs as it continues to generate net losses.

In Q2 2023, the company raked in $1.9 billion in sales, but walked away with a net loss of $100.4 million. Sales in the Home Networks division fell 22% in Q2 to $330 million, thanks to customer inventory adjustments and slack demand.