Lumos Networks may not be seeing a large amount of small cell backhaul opportunities today, but the service provider's ongoing fiber investments will allow it to capitalize on them as wireless operators build out facilities in the territories it serves.
Speaking to investors during the company's third quarter earnings call, CEO Tim Biltz said that Lumos is currently talking with a number of operators about various fiber-to-the-cell (FTTC) opportunities such as small cell, dark fiber, and C-RAN scenarios.
"Our fiber-to-the-cell pipeline has never been larger, but the timing of incremental fiber-to-the-cell contracts is fluid," Biltz said. "We are engaged with multiple operators in our footprint for large FTTC RFPs, including lit fiber services, dark fiber, small cells including those with C-RAN technology."
Biltz added that our "small cell exposure is limited due to lack of activity in our footprint today, but we feel like we're well positioned to capitalize on small cells when deployments ramp in 2016 and beyond."
Wireless backhaul continued to be a factor in its third-quarter results as the telco ended the period with 1,030 unique fiber-to-the-cell (FTTC) sites, up 54 percent from the second-quarter and 45 percent from the same period a year ago. In addition, Lumos ended the third-quarter with a total of 1,363 total FTTC connections a 42 percent increase from the third-quarter of 2014.
During the first nine months of this year, Lumos renewed enterprise accounts totaling $603,000 in monthly recurring charges, up over 17 percent from the same period a year ago. On a year-to-date basis, Lumos has renewed enterprise accounts worth over $26 million of total contract value, up approximately 20 percent from the third quarter of 2014.
Enterprise data and FTTC led the revenue mix with $11.5 million and $7.6 million in revenues, while transport revenues were $9.5 million, down from $10 million in the previous quarter. Meanwhile, its RLEC business declined to $4.8 million.
In tandem with growth of FTTC and enterprise accounts, Lumos Networks added 308 route miles of fiber in the quarter, ending the period with 8,408 total route miles. Additionally, Lumos added 68 enterprise lit buildings in the quarter and 165 in the first nine months of 2015, up more than 47 percent from the prior year period. It ended the period with a total of 1,642 lit buildings.
A key element of its network expansion is Lumos' project to add nearly 665 miles of fiber into the Richmond and Norfolk markets by the end of 2015. This network, which was driven to satisfy a 257-site FTTC build with a major US wireless carrier, will increase the addressable market for its enterprise services by approximately 60 percent.
Analysts praised Lumos' ongoing strategy to focus on more profitable fiber-based business wholesale and enterprise service opportunities.
"We believe LMOS continues to be on the right track by focusing on the higher growth Strategic Data segment and by accelerating its 665 mile network expansion, which should position LMOS well to expand revenues and margins in 2016 and beyond," said Jennifer Fritzsche, senior analyst for Wells Fargo in a research note.
Another potential benefit of Lumos' network expansions is more dark fiber revenues, which it established as a formal product earlier this year.
Today, the service has about $1 million in total dark fiber revenue, but Biltz said he expects it to scale. Proof of interest in its dark fiber was seen during the quarter as it has already won a contract with an unnamed enterprise customer for dark fiber services.
"While we have $1 million in annual dark fiber revenue, and we expect this number will grow substantially over time, which will further improve this revenue mix," Biltz said. "We recently signed our first significant enterprise dark fiber deal, providing connectivity and colocation services to a financial institution with a monthly recurring charge of $12,000."
Lumos' total third-quarter revenue was $51 million, up about 1 percent from the same period a year ago.
For the full year 2015, Lumos reiterated its financial guidance for revenue of approximately $202 million, adjusted EBITDA of approximately $92 million and capital expenditures of approximately $112 million.
For more:
- see the earnings release
Special report: Tracking wireline telecom earnings in Q3 2015
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