Adtran’s Q4 revenues impacted by telco customer's VDSL2 vectoring project delay

Adtran said that one of its largest U.S.-based Tier 1 telco customers is holding up a planned VDSL2 vectoring project as the telco reviews its capital budgets ahead of a potential merger. That delay impacted Adtran's fourth-quarter results, CEO Tom Stanton said.

The vendor expects that when the telco completes this review in 60 to 90 days, capital plans will be finalized.

As a result of the review, Adtran's fourth-quarter financial revenues were impacted. 

Tom Stanton, CEO of Adtran, told investors during its fourth-quarter call that the review is mainly affecting the vectoring business.

“We have a few things going on with that customer: traditional fiber GPON shipments, normal adds and a large project around vectoring to enable 100 Mbps service,” Stanton said. “These projects are going over a level of review, but the big impact is on the vectoring project, which they put on hold until after this review.”

Stanton added that when the customer completes this review, it could engage in four possible scenarios: continue with project as is, focus on specific markets, shift towards FTTH in certain cities or decelerate new deployments.

“I think the customer will come out of this wanting to do something,” Stanton said. “I could imagine that one we could go on as we are. The other is we go on with a more targeted approach towards which cities are built, and I would not surprise me to see them reemphasize specific markets. Thirdly, I could see them shifting towards a fiber deployment and in certain cities and trying to increase the fiber to the premises footprint or they could just slow down.”

RELATED: Adtran’s CEO says Q4 2017 performance impacted by merger review, Tier-1 customer spending cut

While the vendor would not reveal the identity of the Tier 1 customer, CenturyLink stated during a recent investor conference that it would be more targeted with its deployment of 100 Mbps and higher speed broadband services.

As part of that plan, the service provider will focus on more densely populated areas located near its fiber network to address higher speed needs, which could include a mix of vectoring and GPON-based FTTH.

Here’s a breakdown of Adtran’s key metrics:

Network, Services & Support: In the Network Solutions and Services & Support segment, Adtran reported $126,519 in total revenues, a decline from the $162.9 million in the same period a year ago. Adtran reported that Network Solutions and Services and Support revenues dropped. Network Solutions revenue was $96 million, down from $126.7 million, while Services and Support revenues dipped to $30.4 million.

Access, Devices, Legacy: Access & Aggregation and Customer Devices total revenue was $127 million, a decline from the $162.9 million Adtran reported in the fourth-quarter of 2016. Within this group, Adtran reported losses across its individual segments. Access and Aggregation revenues took the biggest hit with $78.8 million, down from $119.6 million in the fourth quarter of 2016.

However, customer devices rose 4% to $32.7 million due to the sales of optical network terminals (ONTs) to support various FTTH build outs.

Finally, Traditional and Other Products rose to $14.8 million.

Regional revenues: Adtran’s United States and International revenues also declined during the quarter. United States revenues were $93.7 million, down year-over-year from $123.7 million. Likewise, International revenues were $32.7 million, dropping from $39.3 million in the same period a year ago.

Financials: Adtran reported sales were $126.5 million, down year-over-year from $163 million in the same period a year ago.

Net income was a loss of $11.1 million compared to income of $7.6 million for the fourth quarter of 2016. Earnings per share, assuming dilution, posted a loss of 23 cents compared to income of 16 cents for the fourth quarter of 2016.

News of the losses should be of no great surprise as the vendor issued a lower fourth-quarter outlook due to a pending acquisition and tighter spending at one of its large Tier 1 telco customers earlier this month.