July 19, 2018
Broadband equipment vendor Adtran is in a strong position to profit from forthcoming investments in higher-speed mobile networks thanks to the attractions of its NG-PON2 portfolio, according to a leading analyst.
MKM Partners' Michael Genovese, who maintains a "buy" recommendation on Adtran's stock, reckons NG-PON2 has a role to play in the backhaul and fronthaul parts of future 5G networks. Adtran Inc. (Nasdaq: ADTN), which published earnings Wednesday (for an in-depth look at the numbers, read this story on Broadband World News, our sister site), is one of several broadband technology vendors that have been at the forefront of NG-PON2 development.
For anyone in the dark, NG-PON2 is a next-generation broadband standard that can support between four and eight 10Gbit/s wavelengths over a single fiber. It features in the broadband plans of some of the world's biggest operators, including the likes of Altice and Verizon Communications Inc. (NYSE: VZ) in the US. (See Service Provider Split Emerges Over NG-PON2 Upgrade.)
Backhaul, for those still in the dark, is the connection between a mobile site and the core network. Wireless microwave technology is sometimes used here, but fiber is much better when there is a lot of high-speed mobile data traffic at play. (See Altice Backs NG-PON2 to Enable 5G.)
Altice is already planning to use NG-PON2 technology in this part of its future 5G networks. Indeed, at a conference in Valencia earlier this year, José Salgado, a network system development manager at Altice Labs, went as far as saying that "5G will be the most important driver for NG-PON2."
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Salgado reckons NG-PON2 could be even more valuable in the 5G fronthaul -- the link between a remote radio head and the baseband unit that processes radio signals. Traditionally, these elements have all been housed at the mobile site. With virtualization of the radio access network, operators could do their baseband processing at data centers, using NG-PON2 for the connections between those facilities and the radios left at the mobile site.
Genovese also thinks Adtran is poised to land additional business with telcos and cable operators in the US. And he lauds the company's efforts to land deals with international players other than Deutsche Telekom AG (NYSE: DT), which has historically used Adtran's equipment in Germany.
"There is stability-to-growth with US Tier 1 customers, strong 2H18 growth in the Tier2/3 market and a new, very positive opportunity with cable MSOs [multiple system operators]," he said in a research note. "Adtran is also diversifying its international business beyond just one key large account."
All of this will sound welcome to investors. Hit by a downturn in the market for network equipment, Adtran swung to a net loss of $7.7 million in the recent second quarter, from a net profit of $12.4 million a year earlier, and its sales were down 31%, to $128 million.
— Iain Morris, International Editor, Light Reading
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