Tellabs Still Looking at Carrier Access

Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) is still looking to acquire Carrier Access Corp. (Nasdaq: CACS) in the neighborhood of $7 per share, according to two sources close to the situation. While Tellabs interest had cooled in recent weeks, the deal never died, and it now looks close to happening. (See Tellabs Close to Carrier Access Buy and Carrier Access: Still in Play.)

The board of directors met this week and one source says the board was set to vote on a number of proposals with Tellabs being the front runner.

The challenge has been showing that Carrier Access can grow to the range of $100 million to $150 million in revenues per year from its current level of about $40 million, sources say.

Carrier Access is telling analysts its equipment is installed in 50,000 cell sites. At these sites, it says, there is a potential for $200 million to $250 million in upgrades. The company also cites an additional 200,000 cell sites that could support its equipment.

The logic for a marriage between the two companies, sources say, is that Carrier Access could not reach revenues of $100 million to $150 million per year on its own, but with the backing of a much larger company like Tellabs, it could.

While on paper the potential revenue growth from wireless backhaul upgrades looks enticing, it is still unclear as to how quickly these upgrades will play out.

"I think certainly the North American Carriers are going to be upgrading their backhaul slowly," says Heavy Reading Senior Analyst Patrick Donegan. "But the technology evaluations that are taking place have been held up by the mergers between the carriers and deliberations on what the right technology solutions are for these upgrades."

Donegan notes that this debate among carriers on how to proceed from a technological standpoint has caused a lot of the delay in these upgrades.

Tellabs declined to comment for this article. Carrier Access could not immediately be reached for comment.

— Raymond McConville, Reporter, Light Reading