Breaking: Goldman $5B Writeoff, Adtran Warning Point to Telco Capex Cut & Highly Distorted Earnings to Come

Goldman Sachs took a $5B writeoff this morning for the new tax law and Bloomberg expects $20B more from Citi. Verizon and AT&T have some of the same issues so may see similar. Do not believe U.S. earnings results in the next year or two because balance sheet adjustments may overwhelm underlying trends. Underneath it all, all these companies are extremely profitable and the tax changes will put them ahead. But the numbers the next 24 months could be highly misleading.

     Verizon has $46B in "deferred long term liabilities" and $38B in poorly defined "other liabilities." Major adjustments - up or down - would surprise no one. Phil Cusick of Morgan did an analysis a while back from which I inferred Verizon would need writedowns. Since he hadn't said that explicitly, he got angry at me and cut me off his distro. (I'd like to be back. His analysis then and other times was on target.) I haven't trusted Verizon's financials for a decade because of unclear items like these liabilities and enormous goodwill. Former CFO Stephenson at AT&T has long been a wizard at delivering the numbers he wants to. 

Suggestion: If you are putting money into this industry, closely follow analysis from John Hodulik and Craig Moffett. They are among the best at finding reality beneath the figures reported.

     Separately, Adtran pre-announced 4Q sales at $125M, $20M less than the last three quarters.

Read more ...

"A Brain Drain & An Empty Shell," If Broadcom Buys Qualcomm

Will they ever again produce a chip like the new Snapdragon 845? The 835 is the best mobile chip in the world, dominating the market in top end smartphones. The newly announced 845, due in June, is reported to be 25%-30% faster. It will be produced on the same 10 nm process at TSMC. The 845 is "A significant upgrade — to get 25-30 percent performance in the same general process node is huge," analyst Jim McGregor tells Rick Merritt in EE Times. It's designed for speeds into the gigabits and ultra HD. 

Jon Peddie's comment in the headline probably goes too far, but the cutbacks at Broadcom foretell problems ahead.

Read more ...

Iliad Free Already Bringing Italian Down Prices

Xavier Niel's Free Mobile offers a 100-gigabyte cap on their 20 euro service, which Jennie bought in Paris. For 20 euros, Telecom Italia offers 5-10  gigabytes. With Free soon to turn on Italy's fourth network, competitor Fastweb brought down prices to compete. In Canada, all three carriers brought prices down before the fourth entered so I expect TI and Vodafone to also adjust prices.

Xavi changed the European Internet when he offered triple play in France for 30 euros. Germany's regulator, Mathias Kurth, told me he pressed his companies to come closer to France's price. The lower mobile prices are slowly spreading to other countries. T-Mobile Netherlands recently went "unlimited" although DT hasn't done that in that in Germany, which recently went from 4 to 3 carriers. 

The anecdotal evidence is strong that prices move 10-20% when a market goes from 4-3 or 3-4 primary carriers.

Read more ...

U,S. Q3: Cable +540K, Telcos -155K. Telcos clobbered across > 1/2 the country

"In the first three quarters of 2017, cable companies added about 2,000,000 broadband subscribers, while Telcos lost about 430,000 subscribers." Bruce Leichtman. Ten years of telco dis-investment across half the United States is allowing cablecos to rise from 55% of the market to 64%. They are pulling further away every quarter. 

AT&T's stock went down $13B on they day they warned about disappointing numbers. If they had spent even a fraction of $13B on investment, their numbers would have been fine. Verizon's investment % has gone down for several years; this quarter, they lost 10,000  broadband customers.

Frontier lost 63,000 subscribers, The stock has gone down 85% this year to a level that implies a serious bankruptcy risk. That is unlikely before 2020 because they don't have large debts coming due. They have been dis-investing for years, with capex less than depreciation. Centurylink lost 101,000 for the same reason. 

Read more ...

G.fast Reality Check

It works and is deployed in dozens of places, including British Telecom and AT&T. T reports typical speeds of 750 megabits, up and down combined. The highest speeds go less than 150 meters, which is fine for fiber to the basement. In 2018, 212 MHz chips will double that speed. Plans include 10M homes passed by BT and a million at nbn Australia.

Read more ...

Wireless Network Design: The Troika

More cells, more antennas, more spectrum are the three major tools for adding capacity. To begin:

Adding antennas is usually the cheapest choice in 2018. Nearly every telco is going to four (4x4 MIMO.) Adding spectrum is very attractive when you have some unused but expensive if you have to buy it. Adding cells was the approach before LTE-A in 2014 permitted aggregation. Since then, tower building has almost stopped in the developed world. Any upgrade should include 256 QAM, more bits per Hz.

Read more ...

To Find Growth, Adtran Goes Wireless, ASSIA Goes GPON

In a shrinking market, growth requires finding new customers. Adtran has been remarkably successful, beginning with a splash in Europe at DT. They've built a surprisingly strong presence in U.S. cable, mostly unannounced. Now, they've cut a deal with CCS to offer microwave backhaul for wireless to the rooftop, a promising market.

Fiber to the basement + G.fast is finding a large market, including AT&T. In many locations, it will prove cheaper to use Wireless To The Rooftop, WTTR. That was the strategy Google planned when they bought Webpass, although they remain in near-stealth mode. Most G.fast is backhauled with 2.4 gigabit GPON, so the 5 gig microwave from others now available has the capacity. The CCS units are small. as you can see in the picture. Huawei tells me they are ready to bond 5 gig mmWave for 10 & 20 gigabits.

ASSIA, known for DSL optimization, has now announced they are supporting Telefonica Latin America on GPON fiber as well.

Read more ...

272M Fiber Connections in China: The Most Remarkable Achievement in My 20 Years of reporting

Jun Zhang, deputy chief engineer of China Telecom Shanghai, was surprised when this New York reporter called him and his colleagues heroes. They have connected directly to fiber more than 272M homes, twice as much as the entire rest of the world. 

There are well over 300M homes passed. 92% of urban homes are covered by fiber. Cities like Shanghai are close to 100% covered. Nearly all the fiber build was done in five years. Prices are relatively low. I am not blind to the authoritarian Chinese state, but I can also admire the achievements. 

LTE is approaching 1 billion users, with speeds constantly increasing. China Mobile is among the top four in 5G mmWave plans and the second to embrace Massive MIMO. 

Read more ...