For Consolidated, wireless tower backhaul opportunities remain, but price compression a challenge

Consolidated Communications' carrier division came off a successful year, building out fiber to a large number of wireless operator towers in its footprint, but pricing remains a challenge.

Speaking to investors during the Jefferies Technology Conference, Steve Childers, CFO of Consolidated, said despite reports that wireless operators are winding down their LTE builds the desire for tower backhaul is still ripe. 

"On the carrier side, we had a phenomenal year with towers and wireless backhaul build outs," Childers said. "We're still seeing opportunity there this year, but just like everybody else we see price competition and churn."

Carrier services were a strong seller in the first quarter. Driven by Ethernet and cloud services sales, total commercial and carrier revenues were $76.6 million. Within the segment, data and transport service revenue was $49.1 million, up year-over-year from $46.1 million in the same period a year ago. 

A key contributor to the carrier sales was also the expansion of its fiber network. Consolidated's fiber route miles rose 5.9 percent or 774 miles year-over-year to end the quarter at 13,812 miles. 

Although Consolidated may not see the same amount of wireless backhaul wins in 2016, wireless operators continue to ask for additional capacity at existing sites or for new sites in markets where they are expanding service.

Besides additional tower capacity, the service provider sees small cell backhaul as another growth opportunity for the carrier business.

"I am not sure this year we'll match the success we saw last year and there's a little bit of price compression and churn," Childers said. "Even though some carriers may have built out 90 percent of their towers, they're still asking for higher speeds and there's small cell opportunities that have not quite rolled out in our area yet."

During the first quarter, Consolidated did see one of its fiber to the tower customers churn due to a pricing issue.

"We had strong growth in all of our markets except for one where we lost one fiber-based customer, which was a unique situation based on pricing mechanisms," Childers said.

Like other fiber-based providers, Consolidated is also seeing opportunities to sell dark fiber-based tower backhaul, but it is being done on a case by case basis.

"We've been maybe slow to embrace it, but we're seeing opportunity for dark fiber for the right price and economics," Childers said.

For more:
- hear the Jefferies webcast (reg. req.)

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