Is AT&T Finished With Tellabs FTTC?
In a note to clients this morning, Morgan Keegan & Company Inc. analyst Simon Leopold writes that "channel checks indicate that AT&T has plans to deploy Ericsson FTTP gear in applications previously slated for Tellabs, and may even rip and replace deployed Tellabs access platforms."
Speculation that AT&T would move away from Tellabs has existed ever since it was first announced that AT&T would be acquiring BellSouth.
At the time, BellSouth had been deploying Tellabs gear for its FTTC project, but AT&T's SBC legacy was known for instilling its incumbent vendors in its newly acquired territories. (See Will AT&T Value BellSouth's Vendors?, Wall Street Frets About BellSouth Suppliers, Ma Bell Merger Thumps Tellabs, and AT&T Vendors Sing Merger Blues.)
Furthermore, AT&T's fiber strategy doesn't include FTTC deployments, as it is mainly using FTTN in existing neighborhoods and FTTH in greenfields. Ericsson recently gained exposure to AT&T by winning part of its greenfield business as one of its GPON partners. (See AT&T Picks GPON Players.)
While losing a Tier 1 customer like AT&T is certainly a blow, Leopold doesn't feel it will have a significant impact on Tellabs' earnings per share since much of its FTTx sales come from its strong relationship with Verizon Communications Inc. (NYSE: VZ). Tellabs sales of FTTP gear to Verizon are on the upswing, according to Leopold.
Tellabs would not comment on the situation, while AT&T and Ericsson did not immediately respond to requests for comment.
— Raymond McConville, Reporter, Light Reading