Adtran Will Be a 5G Winner, Says Analyst

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."

Want to know more about 5G? Check out our dedicated 5G content channel here on
Light Reading.

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

brooks7 7/19/2018 | 4:29:49 PM
Re: Second opinion  

Well, getting back to whether NG-PON2 or some other PON variant will be the winner in 5G deployment is I think not, at least in the US.  This is going to be a very tough challenge for many companies, we need to really define where this PON is a viable technology.  If you are connecting to towers, there is no way that this is a PON scheme in the most part.  There will be several service providers who will need many Gbps of dedicated bandwidth.

This means that PON might be a small cell interconnection scheme.  Maybe.  There will be first a huge problem of being a non-incumbent wireline provider AND try to deploy small cells.  There will be a huge gap in time (to perform construction) and all types of city regulatory issues.  Remember there will likely be 3 carriers who need access to the small cell sites as they deploy in each major city.  This means to me that a high rate CWDM or DWDM setup is much more likely than a high rate PON.  That way when AT&T puts fiber in LA (for example) the ability to wholesale bandwidth is clean.

I am not worried about the ONT price here for PON.  We are talking about lots of Gigabit connections and we can not conflate the price of residential deployment with these deployments.  I just think that wireless carriers will look to be able to deploy and rent national technologies - not local/regional ones.  Today, that means pt-pt fiber or wireless backhaul.


mendyk 7/19/2018 | 3:27:48 PM
Re: Second opinion If you prefer, Iain, I can do what almost everybody else does and not read your posts. But I read because I care, as pointless as that mey seem sometimes.
mendyk 7/19/2018 | 1:33:45 PM
Re: Second opinion You are too kind, Paul. That may be part of the issue.
iainmorris 7/19/2018 | 1:25:43 PM
Re: Second opinion Very good, Dennis. The respect is mutual. I can assure you.
PaulERainford 7/19/2018 | 1:25:02 PM
Re: Second opinion You're a real team player, Dennis. You'll be much missed.
mendyk 7/19/2018 | 1:24:42 PM
Re: Second opinion Now THAT'S what I call a second opinion. Thanks, D.
Duh! 7/19/2018 | 1:22:12 PM
Re: Second opinion I believe he is forecasting more incremental growth for 5G than the hype would suggest?

One obvious outcome: the supply chain for NG-PON2 ONTs needs to mature in order to achieve reasonable pricing and improve some parameters. Some of that is time, rather than volume, constrained.  A longer build-up for 5G is going to help out a lot with capex and with the operators' point-to-point vs PON analysis.

Also, NG-PON2 is not a one-horse race. Adtran has been doing some great work, in  research, standards and design and manufacturing. So has Calix, Huawei and Nokia. Each has its strengths and weaknesses, both on the technology side and the business side. It's much too early to make a reasonable guess about market share.
mendyk 7/19/2018 | 1:15:11 PM
Re: Second opinion He seems to be a man of many things. And multiple sources can make a story even betterer, or so I learned in Intro to Journimalism.
iainmorris 7/19/2018 | 1:04:40 PM
Re: Second opinion Why’s that? We could ask him but I suspect NG-PON2 is not really his thing.
mendyk 7/19/2018 | 12:36:19 PM
Second opinion I wonder what Bengt Nordstrom thinks of all this.
Sign In