Jeff Gardner, president and CEO of Windstream (Nasdaq: WIN) told investors this week that while the telco's wholesale sales force has been successful in selling fiber to the tower (FTTT) services, they will focus more on selling other network services.
Gardner (Image source: Windstream)
"Our sales force has really made a living in the past three years selling almost exclusively fiber to the tower business, but now we're trying to get them more focused on other elements of our network," Gardner said during during the J.P. Morgan 41st Annual Technology, Media and Telecom Conference in Boston. "We have a great national network that is very attractive to others in the space."
Those other elements could include selling wholesale Ethernet services to service providers that need off-net connectivity to, for example, fulfill a multisite enterprise customer order that includes sites outside of their network footprint. In March, the telco expanded its Carrier Switched Ethernet service to serve carrier and enterprise needs nationwide.
Regardless of what Windstream needs to do to increase future wholesale carrier sales, FTTT has been a fruitful venture.
While Gardner acknowledges that the conversion from copper to fiber-based backhaul is placing pressure on other telcos, their approach has helped Windstream overcome those challenges.
"We recorded growth this quarter, which was viewed very well in the marketplace," he said. "Some are seeing a lot more pressure in that space and it's because we have been really aggressive on the fiber to the tower."
Windstream's aggressive FTTT buildouts helped drive up its Q1 carrier services revenues 3 percent year-over-year to $167 million.
To date, the telco has equipped about 3,000 tower sites with fiber and 1,600 are in the process of being connected. About 60 percent are in-network and the remaining 40 percent are off-network, which is incremental revenue.
"While we are experiencing what everyone else has when we do a conversion to fiber from copper, we see some pressure because we lose the circuit switched activity very quickly we see an uptick in data usage and carriers are upgrading from there," Gardner said. "We start them out at 50 Mbps, for instance, and when their demands necessitates that they upgrade we see that happen very quickly."
The rise in FTTT and carrier revenues came amidst a slowdown in its total wholesale revenues. Overall wholesale revenues declined 17 percent to $152 million due to lower switched access revenues from declining consumer voice lines and lower intrastate access rates as part of inter-carrier compensation reform implemented in July 2012.
Looking forward, Gardner said that they "will see very little activity in fiber to the tower in 2014 because we have essentially completed that buildout for our partners."
However, Gardner does see revenue potential in selling services to multiple tenants and higher bandwidth speeds as wireless operators look to support the ongoing demand for higher wireless data speeds.
"All of the business we won today was based on a single tenant assumption, so any time we can add a second tenant we can really improve the returns a great deal," he said. "Also, they were based on a model with some assumptions on data usage, and what we're seeing today is our carrier partners are way ahead in terms of their data consumption, which means they're upgrading to a higher prize for more bandwidth very quickly."
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