FiOS drives 2Q12 consumer revenue gains for Verizon

2012-08-03 17:54:08

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Israel Credit Cards builds private optical network with Ciena
Ciena Corp. (NASDAQ: CIEN), working with BizConnect Platinum partner Telrad, has won a contract to build a low-latency private optical network for Israel Credit Cards Ltd. (Cal). The private optical network connects Cal’s new data center in Yehud to its main facilities in Giv’atayim.The metro network uses Ciena’s 4200 Advanced Services Platform to supply two 10-Gbps Ethernet and four 4G Fibre Channel connections between the sites to meet business growth and disaster recovery requirements. In moving its backup site in Rishon LeZion to a new, larger facility in Yehud, Cal needed to quadruple capacity on the 30-km link between the data centers, and decided that the construction of a dedicated network over two leased dark fibers would prove more beneficial than leasing a managed line, Ciena says.“Our business continuity planning efforts and regulatory compliance requirements, coupled with our constant growth and commitment to offer our customers the best service possible, led to the need to reassess our data center interconnect infrastructure,” explains Avi Polak, head of infrastructure department at Cal, via a Ciena press release. “Two aspects played a central role when selecting our networking partner: future-proof technology and trust. Ciena’s highly resilient, scalable and low-latency network allows Cal to cost-effectively plan for future growth. At the same time, we also know that Ciena’s roadmap will continue to support this platform, since it is ahead of the industry and allows a seamless upgrade to 40G and beyond. Telrad’s ability to meet Cal’s timeline and ongoing support has been equally important.”The deployment requirements were indeed strict. Ciena and Telrad had the links up in running within two weeks without disrupting Cal’s existing services, asserts the systems house.The new network has already benefited Cal, Ciena says. For example, the time to complete daily data backups has improved by 75%, and now every transaction can be stored at both sites. This allows Cal to comply with regulatory disaster recovery requirements and uphold its business continuity plan, Ciena says.
Ovum: Data centers to boost optical network system sales
Market research consultancy Ovum predicts good things in the long term for the optical network hardware market, thanks to increasing bandwidth demands from data centers. Sales of fiber-optic network systems will grow at a 5% compound annual growth rate through 2017, to reach $20 billion, according to Ovum’s new “ON Forecast Report: 2012-17.”“The new bandwidth driver is data centers. Large-scale data centers continue to be built out – both the multi-tenant, carrier-neutral variety and private data centers,” says Ian Redpath, principal analyst in Ovum’s Network Infrastructure practice. “The data centers are being placed in brand new locations, creating brand new optical networking demands. For example, the new Facebook data center at Lulea, Sweden, near the Arctic Circle, will require terabits of bandwidth. These new demands are not unique to Lapland – they are emblematic of a trend unfolding in multiple European and North American locations.”Latin America will offer the most opportunity, Ovum believes, because of modernization efforts to improve regional connectivity to support mobile and broadband access network deployments. Meanwhile, North American demand for optical network systems will show what it terms “solid growth” thanks to Tier 1 deployments of 100-Gbps technology.The Asia-Pacific market will continue to expand as well, although not at the same explosive rate as the past five years. “In China, the optical network market has trebled in size over the past 5 years and continues to grow. Much of the core backbone was built in support of early generations of mobile technology, but there is still a wave of high-speed fixed broadband and next-generation mobile to come,” predicts Redpath.And Ovum even expects good news from the EMEA market despite its current macroeconomic problems, as deployments will continue in Russia, the U.K., Eastern Europe, and Africa. For example, Russian network operators want to supply pan-Asian capacity connecting the Far East to Europe overland. The southeast U.K. is another hotspot, with over 150 data centers outside of central London that require high-bandwidth interconnection.“All told, the global optical network market is at a very interesting point in its evolution. New demands are arising just as the industry’s latest technology offering is coming to fruition,” concludes Redpath.
FiOS drives 2Q12 consumer revenue gains for Verizon
While its wireless business remains the star, Verizon Communications Inc. (NYSE, NASDAQ:VZ) reported yesterday that it also saw year-on-year growth in consumer wireline revenues in its fiscal second quarter, thanks mainly to its FiOS services. However, overall operational revenues from wireline operations continued to decline, while FiOS additions slowed sequentially.Verizon says its various FiOS offerings now account for 65% of its wireline consumer revenues, with approximately 70% of FiOS customers opting for a triple-play package. Wireline customer revenues from all sources grew 2.5% in the second quarter compared with the same quarter in 2011. Overall consumer wireline ARPU exceeded $100 for the first time, Verizon added, an achievement aided by the fact that the ARPU from FiOS customers now stands at $149.The service provider also reported it added 134,000 net new FiOS Internet connections and 120 net new video connections during the three months ended June 30. These additions brought total FiOS Internet connections to 5.1 million (a 36.6% penetration rate) and video connections to 4.5 million (a 32.6% penetration rate). Verizon says it now has a total addressable market of 17 million premises for its FiOS network.However, FiOS growth slowed sequentially Verizon added 193,000 FiOS Internet and 180,000 FiOS Video net connections in the first quarter of the year (see “No more DSL in FiOS territories, says Verizon”). This lower level will become the norm, Fran Shammo, Verizon executive vice president and CFO, told  analysts on the earnings call held July 19.“We continue to seek ways to drive the FiOS revenue growth, improve operating and capital efficiencies, and maximize profitability. Key parts of this strategy include targeted pricing actions, further differentiating our services with the offers like FiOS Quantum, our copper-to-fiber migration in areas with chronic repair issues within FiOS markets, and a number of other cost-management initiatives,” Shammo explained. “In light of these actions, we feel a more natural range for FiOS quarterly net adds going forward should be about 20,000 to 30,000 less than our previous range of 180,000 to 200,000. We are confident that at these levels we can still maintain an increasing revenue growth trajectory and expand profitability.”Shammo blamed seasonality and price hikes for the fact that second quarter additions didn’t achieve even these lower thresholds.Broadband connections hit 8.8 million during the quarter, which represents an increase of 2.6% from the year-ago quarter. This total includes a net loss of 132,000 DSL subscribers during the recently concluded three months.Looking at wireline operations in general, the segment continued to struggle in the second quarter. Operating revenues came in at $9.9 billion, down 3.1% versus the same quarter of 2011.Operating income margin was 1.9%, up sequentially from the first quarter’s 1.6% but short of the 3.1% enjoyed in 2Q11.“We estimate that about 65% of the overall wireline revenue decline this quarter was a result of our own deliberate actions to improve profitability,” Shammo told the analysts. “Examples include the de-emphasis of drop-ship CPE; the continued exit from certain international wholesale routes and contracts; decommissioning end-of-life products, like ATM, frame relay, and IP VPN; no longer offering dry-loop DSL or selling DSL in FiOS markets; and exiting nonstrategic product lines like calling cards and payphones.”Overall, Verizon had a good second quarter, which repeated the first quarter’s double-digit gains in operating income and earnings per share. At least part of this performance derived from reductions in capital spending compared to last year’s levels. The company spent $2 billion on its wireless operations in the quarter, which was 23% lower than last year at the same time. Wireline capex during the second quarter came in at $1.6 billion, a year-on-year decline of 5.3%. For the first half of the year, Verizon’s wireless capex was $3.9 billion,  down 27% from the same six months of 2011, while wireline capex was flat versus the year-ago time frame at $3.1 billion. The carrier’s overall capex to revenue ratio in the first half of 2012 was 13.1%, down from 16.4% over the first half of 2011.
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