The state of the telecom supply chain has been top of mind for operators for perhaps the past two years, with everyone wondering when shortages and long lead times will fade away for good. Consolidated Communications CEO Bob Udell offered his take on the situation, noting that while certain parts of the supply chain have stabilized, he’s not sure things will ever go back to the way they were before the pandemic.
“I wouldn’t say you can guarantee it’s all behind us now, but we’ve got more visibility than we ever have into how to manage it and more forward information on when people are running into either demand challenge or raw material challenges,” Udell said during a Cowen investor conference.
He continued: “I think we’re in a new normal that will continue to stabilize to something different than what we’ve known in the past. But I don’t see it getting back to what we know as total just in time [ordering]. I think you’re always going to be managing looking deeper into your suppliers than you have in the past.”
The CEO said Consolidated is in good shape to fuel its ongoing fiber expansion, noting it has a diverse range of suppliers for its cabling and cases. It has also overcome CPE issues which delayed the debut of its Fidium Fiber product. Udell said it has now built up an “ample supply” of wireless router inventory to support its fiber sales plans.
Udell also touched on how Consolidated is weathering another issue challenging the industry: inflation. Thanks to long-term materials agreements, he said it has been able to stay a bit ahead of headwinds from inflation. He added it’s also managing its labor force to strike the right balance between in-house labor for which it can set costs and contractors who may raise rates. Specifically, he said Consolidated has been beefing up its roster of in-house splice engineers and will have added 80 such employees over the past 18 months as of the end of 2022.
Fiber, FWA competition
Though there’s a broadband land grab happening in the U.S., Udell said it hasn’t really seen much in the way of competition from fiber overbuilders. Less than 5% of its service area either currently has an overbuilder or a company that plans to become one.
He added it doesn’t see fixed wireless access (FWA) as much of a threat either, in part because the geography of its northern New England territories doesn’t lend itself to broad deployments of the service.
“Cell coverage there is still a fairly significant challenge,” he explained. So, “I don’t see it as a major change agent, probably more of an opportunity for us” to provide backhaul services.
Asset sales
Consolidated has been on a bit of an asset sale spree lately, offloading its Ohio holdings in September 2021 and selling its Kansas City operation in March 2022. Earlier this month, it also sold its stake in a wireless joint venture to Verizon.
Udell said he believes dealmaking could slow due to changes in the debt markets, but noted it will continue to evaluate its holdings for monetization.
“We’re in casual and some more serious conversations on different assets and I think those will continue,” he said. “The fiber-to-the-home build is very attractive and we think the return we can get for going further in the markets that we’re focused on and can build soon and where we have construction crews already working, it’s worth increasing the investment there.”