Bruno wanted G.fast but DT chooses cheaper 35b. February 2014. CTO Bruno Jacobfeuerborn startled the broadband world by suggesting they would deploy 500 megabit G.fast. Kabel Deutschland has been winning customers away by offering twice the speed of DT for the same price. BJ knows gigabit cable is close and he wanted to stay in the game. 25M homes were initially promised the upgrade and that's now been raised to ~30M, or 80% of the country.
A year later, his plans were cut back because of DT's financial problems. DT has lost billions on T-Systems, their computer outsourcing division as well as billions on T-Mobile USA. The losses in Greece and Eastern Europe are also high. Over the last four years, they've paid more in dividends than their net profits. Debt is up by six billion.
Two hours after the announcement, Jim Baaker put out a national press release looking for clients to sue Ikanos, Qualcomm or their insurers. Since the price was reasonable - 50% above the previous share price in a tough market for chips - the suit has little merit. But the companies might enrich the plaintiff's lawyer to avoid the time and expense of a trial.
Giant steps in. Ikanos, which absorbed Globespan, Virata, Conexant and Centillium, is a crucial part of the history of DSL. In a flat DSL market, they've struggled for several years. Promised products for node scale vectoring and G.fast are not visible in the market although I understand they are far advanced. CPE chip sales have declined as Chinese chipmakers entered the market. A year ago, Dado Banatao's Tallwood VC firm and Alcatel bailed them out in the belief the new chips would find buyers. Time and money have run out and they've accepted the offer. Ikanos has been on the block for a while, with an asking price of $80-100M.
Qualcomm's entry surprised me because they don't offer complementary chips for cable and fiber. The deal was presumably inspired by Intel's purchase of Lantiq, creating a powerful combined offering of DSL, cable (formerly TI) and wireless (formerly Infineon) chips for home connections. Ikanos also sells Fusiv, a network processor for gateways.
LTE + DSL gateways are in modest deployment in Germany and could play a surprisingly important future role. LTE with realworld speeds of 50+megabits is deploying widely around the world. Many people believe spectrum limits LTE capacity so much that the telcos can't afford to use LTE bandwidth to supercharge DSL. That's probably true in midtown Manhattan but 95+% of the time LTE towers run far below capacity. This is especially true in rural areas, where DT intends to sell DSL + LTE in volume.
NFV, SDN starting to inspire white box fears. (Update 4/31 Adtran's stock climbed and Calix plummeted, leaving them both about the same % lost.) Adtran's stock fell 10% Wednesday, about $100M, to the lowest level in five years. Tom Stanton's company was hit hard by disappointing sales to two major customers. Quarterly sales were slightly down, partly explained by the euro falling against the dollar. Interim CFO Interim CFO Mike Foliano didn't warn the street of the sales decline. The analysts expect a wink and nod in advance with inside information.
Adtran remains a capable and profitable company but the market has been treating it as a growth stock. Telecom is not a growing business. Nearly no company except Huawei has seen sales increase.
AT&T canceled a project to upgrade some of the old BellSouth territory. That's not much of a surprise; AT&T's $4B capex cut this year is the largest of any telco over the last decade, anywhere in the world. Craig Moffett for several years has been pointing to how hard Randall has to work to cover the dividend. Over the last four years, dividends have actually exceeded earnings per share.
Deutsche Telekom is trying to weasel out of their repeated commitment to meet the EU 100 megabit speed with vectoring to 24 million homes in 2016.
50-100 megabits so cheap it can go everywhere. Lantiq's new VINAX dp8 is designed to lower the price of an 8 port DSLAM to $20/connection. Include the hookup cost and it's only about what the customer pays in a single month. Lantiq says similar units today cost more than twice that. The nominal speeds in the lab are 200 down, 100 up; 50+ megabits down, 25+ up will often be practical for 500 meters. In small buildings, performance will be much better, often 100/50. While larger buildings can be served with multiple cheap units, the interference in the binder becomes a crucial factor. With vectoring, the rate reach would often double, but that's a more expensive and complicated system.
The unit is based on their existing 8/16 port VDSL chips, controlled by an inexpensive network processor Lantiq originally designed for their GPON system on chip. Eliminating the high-performance network processor simplifies design, further reducing cost.
Late arriving chips push DSL pioneer into Intel deal. Intel is back in the DSL business more than a decade after losing about $2B without bringing a DSL chip to market. Lantiq is a solid company with excellent engineers around the world.
Not long ago, CEO Christian Wolff was planning for a $1B IPO. Imran Hajimusa was exhibiting spectacular demonstrations of world-beating performance WiFi, some of the first publicly shown vectored VDSL and more. The chips haven't made it to market. Update 3/03 Vectored VDSL chips for modems are shipping, although other chips are not.
Very limited sales of ADSL, VDSL chips for now. Ikanos was the first with VDSL2 DMT, today's standard. They've incorporated Globespan-Conexant, once the largest ADSL chip provider. But until their vectored & G.fast chips ship, sales are dismal. With investments from Alcatel and Tallgrass, they have time to turn things around - when the chips get out the door. Tallgrass and management bought an additional $12M in equity early in February.
They are particularly enthused about G.fast. On their investor call http://bit.ly/1BcvVC1, "One is that G.fast is obviously the flagship of the 1-gig push forward, if you will. We expect that market to be -- as the percentage of the total to be around 25% of the mix of the balance of the DSL technology, but one of the things that interesting around G.fast is an end-to-end replacements or deployment takes place.
CEO Yaolong Tan "Our chips are 8% faster than Broadcom's." Tan earned his doctorate at UCLA's Henry Samueli School of Engineering in 2000. He worked in Silicon Valley for years, and now is back in China. He's CEO of Triductor, founded in 2006. He is shipping VDSL2 vectored cpe chips to Chinese manufacturers who in turn are distributing the boxes worldwide.
Tan received his UCLA degree directly from Henry Samueli. He has enormous respect for Broadcom. But he's not afraid to take on Broadcom's chips. China is deeply committed to replacing imported chips with Chinese designs. Tan said,"The technology of this chip used to be monopolized by America, so our country had to spend tens of millions of dollars importing from overseas. What my team and I want to do is realize the localization of this chip in the new developing wave of semi-conductor industry, to equip Chinese people with their own high-speed video networks."
Triductor, like HiSilicon, has also announced a G.hn chip. While G.fast is getting the publicity, thanks to an effective campaign by the ITU, it's two years or more away. G.hn, a much simpler system, is already being used to extend "fiber to the basement" to apartments at hundreds of megabits. China Telecom & Unicom, the monopoly landline providers, are fiercely resisting government demands they upgrade something like 100 million apartments from DSL to fiber. Fiber to the basement + G.hn might be an attractive alternative.