Jeff Gardner, CEO of Windstream (Nasdaq: WIN) on Thursday during the Bank of America Merrill Lynch 2012 Media, Communications & Entertainment Conference, said that he's seeing the demand for Fiber to the Tower (FTTT) revenues from its largest wireless customers continue to grow.
Gardner (Image source: Windstream)
The FTTT growth coming from two sources: inside its own traditional ILEC market and outside of market where it competes with other ILECs and aggressive cable operators.
To date, about 60 percent of its FTTT sales have been is in its own markets where customers pay on a per Mbps basis. Gardner said that one of the major wireless operators have already doubled their original bandwidth is when they go to one of Windstream's FTTT sites.
"In market we're earning in excess of our cost of capital and out of market it's totally incremental revenue that we've won versus incumbent LECs and cable companies," Gardner said. "We're getting better and better at this and we're going to spend $250 million on fiber to the tower projects."
Gardner admits that Windstream does face a number of construction challenges in building out FTTT in rural markets where a number of its wireless operators need alternative backhaul sources where they don't have wireline assets themselves.
"It's not easy to build fiber to the tower in rural markets," Gardner said. "This is underground fiber—miles and miles--to reach very rural cell sites with 5-7 year contracts."
Gardner, however, is confident that given the low density of these rural sites, it should be able to gain renewal with its customers when the contracts end.
Regardless of the challenges it faces, FTTT overall has become a large business driver for the telco.
Although Windstream's wholesale revenues declined 12 percent, to $214 million, a factor the telco attributed the decline to a decision in the first quarter to suspend and modify certain wholesale products it inherited from its acquisition of PAETEC, Fiber to the Tower (FTTT) was a growth engine for its wholesale business
During the quarter FTTT revenues were $164 million, up 5 percent year-over-year on a pro-forma basis.
To bolster its FTTT capabilities, the service provider made a number of its organic and inorganic bets in recent years by expanding its own fiber reach and making strategic purchases.
In 2010, Windstream announced its own plans to upgrade and expand the fiber network in its own 16-state ILEC territory with an additional 30,000 fiber route miles.
Besides buying PAETEC, which included the Intellifiber wholesale operations that came from Paetec's acquisition of the former Cavalier Telephone, Windstream also bought the former fiber-rich Kentucky Data Link (KDL).
With KDL, Windstream also enhanced its fiber reach to target more FTTT opportunities with a network that spans 22 states and a staff that understands how to build complex network configurations for wireless operators.
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