FiberTower reports Q1 revenue increase but long-term growth looks hazy

Wireless backhaul services provider FiberTower reported year-over-year revenue growth of 23 percent, but its long-term growth prospects remain cloudy as Clearwire (NASDAQ:CLWR) continues to terminate the company's services and its other two largest customers--AT&T (NYSE:T) and T-Mobile--are planning to join forces.

Earlier this month FiberTower announced it received its second early termination notice from Clearwire to discontinue some of its backhaul services effective April 30. During its first-quarter earning release, Clearwire said it took $31.3 million in write-offs related to its abandonment of projects that no longer fit within its strategic network plans. In addition, Clearwire said it terminated certain tower leases.  

"Early in the first quarter, we responded to these terminations by taking immediate actions to reduce costs, including a 10 percent head count reduction, and created a 2011 capital plan that enables us to fulfill our customer projects," noted FiberTower President and CEO Kurt Van Wagenen during the company's first-quarter conference call, according to transcripts from Seeking Alpha. He added that the company won't see a material impact on its liquidity through at least March 31, 2012. "However, the loss of this customer does have longer-term impact on revenue and adjusted EBITDA run rates," Van Wagenen said.

In regards to AT&T's proposed $39-million acquisition of T-Mobile, Van Wagenen said: "After giving effect to the disconnect from Clearwire, these two customers together represent approximately 63 percent of FiberTower revenue. While it is too early to predict the implications of this transaction on our current and future business opportunities, we are assessing the situation carefully and remain actively involved with both customers."

A third challenge Van Wagenen cited is increasing churn in TDM services as the wireless carriers accelerate their migration to Ethernet backhaul. "This accelerating TDM to Ethernet migration trend has intensified competition, and despite the fact that we are seeing incremental demand for TDM services on various sites, we are also experiencing increased TDM churn in some of our markets," he said.

In the short-term, Van Wagenen said the company hasincrease its 2011 capital program range to take advantage of opportunities in its sales channel. "We are funding this increased capital program with the ETLs (early termination liability) we are receiving by investing a part of the proceeds in opportunities that allow us to add revenue and adjusted EBITDA in the near term. In addition, we are working on other creative funding solutions that may enable us to pursue additional opportunities in our new business pipeline going forward."

In addition, the company said it will make available in the next few months a 1 Gbps radio in its 24 GHz spectrum band as a way to leverage its spectrum and microwave expertise for LTE and other high-speed networks. "We believe this high-capacity solution will provide a great opportunity to leverage our microwave expertise by building extensions to cell sites that are difficult to serve with fiber. We are seeing increasing sales opportunities in Tier 2 and Tier 3 markets that are ideal for a hybrid fiber-microwave solution," Van Wagenen said.

FiberTower's other first-quarter metrics:
- Net loss for the first quarter 2011 was $10.1 million, compared to net loss of $11.8 million in the first quarter of 2010
- An increase of 16 percent in average monthly revenue per site deployed
- EBITDA improved $2.7 million from a loss of $1.9 million

For more:
- see this release
- read this Seeking Alpha transcript

Special Report: FierceWireless Q1 earnings page

Related articles:
Clearwire sees record revenues, but losses mount thanks to write-offs
FiberTower loses more of Clearwire's business
DragonWave cuts Clearwire strings with FiberTower microwave deal
FiberTower fills out its fiber footprint