Backhaul services for wireless carriers, including for small cells, continues to be a noteworthy opportunity for the nation's fiber providers like Lumos and Zayo. Indeed, executives from both companies discussed the small cell opportunity during their respective earnings conference calls this week, noting that demand remains slightly unclear but that the eventual opportunity could be significant.
Verizon is likely driving much of the discussion around small cells; the carrier has said that it is in the midst of a major small cell deployment. And Sprint executives too have said the carrier will leverage small cells and its 2.5 GHz spectrum to densify its network.
But analysts generally expect T-Mobile, AT&T and other carriers will deploy more small cells in the future in order to improve their wireless coverage and network capacity.
"The small cells are interesting because it's live, it's all over the map right now," Zayo's CEO Dan Caruso said on the company's quarterly conference call this week with investors, according to a Seeking Alpha transcript of the event. "There is a little bit of a stage where people are getting up learning curves, both those who were bidding on projects and implementing them; investors, who want it back, those kind of companies, as well as the carriers who are trying to figure how to negotiate the contracts and ask for prices. So we've seen some deals in pricing out there that frankly we scratch our head at."
Added Caruso: "As we kind of navigate our way through that, we have to remind ourselves, where do we get heavily engaged; how do we price a deal; what's our view about what happened after you sign the deal? And in some cases, if there is overly aggressive, overly ambitious competition, sometimes, they're going to learn the hard way by winning a deal and maybe they got a little bit overambitious. So it'll be interesting to watch this over the next two years, three years, four years."
Zayo CFO Kenneth desGarennes added that the company has been working on a small cell deal for a year and a half in Texas that it just completed in March. "So it's not out of timing to work on some of these deals for a long period of time before they get inked," he noted.
Zayo owns and operates an 110,000-mile fiber network in the United States and Europe. And mobile infrastructure is currently driving most of the company's capex activity: Wells Fargo noted that Zayo added fiber connections to 208 towers and 102 small cells during its most recent quarter, and is working on thousands more.
Last year, Zayo said it plans to dedicate $75 million build out 1,000 additional small cell sites.
As for Lumos, the company too is working to connect both cell towers and small cells with fiber backhaul. The company said during its earnings call this week that it now counts 1,252 cell towers on its fiber network, up 345 in the last year. The company is also eyeing the small cell opportunity.
Indeed, CEO Tim Biltz said in November that the company's "small cell exposure is limited due to lack of activity in our footprint today, but we feel like we're well positioned to capitalize on small cells when deployments ramp in 2016 and beyond."
The analysts at Wells Fargo this week noted that Lumos' network expansion efforts "also opens up new opportunities within the dark fiber, colocation and small cell space."
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