Hawaiian Telcom continues to benefit from the wireless industry's ongoing move to 4G LTE as the telco is finding that its wholesale wireless operator customers are purchasing higher increments of bandwidth.
Scott Barber, president and CEO of Hawaiian Telcom, told investors during the third-quarter earnings call that fiber-to-the-tower is one of the largest growth elements in its wholesale service mix.
As of the end of the third quarter, Hawaiian Telcom completed the backlog of connecting 444 tower sites, giving it an annualized revenue stream of $6.4 million. It also has another 95 wireless tower sites under contract.
"Growth in wireless data requires wireless carriers to continue to upgrade network capacity under existing cell sites," Barber said. "As a result more than half of the cell sites that were initially provisioned with 55 megabit circuits have been upgraded to 100 megabits or higher and over 80% of our existing cell sites are now 100 megabit or greater, with a greater number of sites been an upgraded to 200 megabits and more."
However compelling the growth of next-gen fiber-based Ethernet wholesale services may be, Hawaiian Telcom's migration of customers from TDM-based copper circuits to fiber continues to be a near-term drag on overall wholesale carrier revenues.
During the third quarter wholesale carrier data revenues declined $200,000 year-over-year to $14.2 million, mainly due to certain wireless carriers disconnecting lower bandwidth legacy circuits based on month-to-month contracts and moving to fiber-based, Ethernet circuits on multi-year contracts.
The migration of its carrier customers onto higher speed Ethernet circuits that include multi-year contracts means that Hawaiian Telcom will create a more sustainable wholesale revenue stream over time.
"On wholesale, we're seeing a large number of those DS1 that were used to server those cell site have already disconnected and now we're going to start to slowly disconnect to DS3s that were in the backhaul back to their switching centers," Barber said. "So we have a little bit more that we have to swallow there, but that should be far behind at the end of next year or early '17."
- see the earnings transcript (reg. req.)
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