Verizon's plans to build out an expansive fiber network has driven Prysmian—one of the telco's main suppliers—to initiate a $15 million expansion of its plant in Lexington County, South Carolina.
This expansion will enable the company to make good on a $300 million contract it won from Verizon to build a new fiber network that will support a mix of wireless 5G, business and consumer services across multiple markets.
Prysmian will supply nearly 11 million miles of ribbon and loose tube cables.
News of this expansion should not be a great surprise. When the fiber supplier won the agreement with Verizon, Prysmian said it would make a significant investment through 2018 in its U.S.-based optical cable unit. Prysmian already has three telecom production sites in the U.S., two to produce optical cable and one for optical fiber.
Prysmian Group's telecom division has qualified as an optical fiber, optical cable and connectivity solutions provider to Verizon for more than a decade.
Expansion is a priority
The Lexington County expansion is part of the North American investment. Upon completion, the facility will become Prysmian’s top producer of fiber cable in the world. This project complements two additional South Carolina investments, which the company announced earlier this year.
In July, Prysmian announced a $14 million investment in its Abbeville facility to fulfill future renewable energy projects. Later in August, the company broke ground on a new research and development center expansion in Lexington, bringing additional industry experts from around the world to South Carolina.
“Over the years, the manufacturing industry has grown dramatically throughout the State of South Carolina, creating a unique ecosystem in our region that attracts top-tier talent,” said Hakan Ozmen, CEO of Prysmian Group North America, in a release.
Construction companies could benefit
The pact with Prysmian was the second major optical cable and component deal Verizon has signed. In April, Verizon signed a $1.1 billion, three-year fiber and hardware purchase agreement with Corning. Verizon will purchase up to 20 million km (12.4 million miles) of optical fiber each year from 2018 through 2020.
While no deals have been announced, Prysmian and Corning could also benefit from fiber expansion programs from AT&T, CenturyLink and Comcast. AT&T, for one, is committed to connect 12.5 million homes with 1 Gbps-capable FTTH network services by 2019—a figure that could surpass 14 million homes. The service provider has connected over 5.5 million homes with hopes to connect a total of 7 million by the end of this year.
But the deals with Prysmian and Corning could translate into further business for network construction companies like Dycom and MasTec.
Dycom reported in its fourth quarter earnings report an increase in revenues from Verizon. Verizon is Dycom’s fourth largest customer with 10% of its revenues in the period. The company has already signed several contracts with the telco in recent years, including construction, maintenance and engineering contracts covering multiple states.
Similarly, MasTec told investors during the company’s second quarter earnings call that new fiber expansion projects are setting it up to ramp up future wireline revenues.