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7 September 2021

Adtran and Adva create fiber heavyweight, but Gfast may be a casualty

Adtran and Adva, two broadband equipment suppliers hailing from opposite sides of the North Atlantic Ocean, are merging to create a fiber-focused network powerhouse.

In a deal directly influenced by pandemic Internet usage trends, it will bring German firm Adva within touching distance of unicorn status at an equity valuation of $934m, in a union with US-based Adtran that creates annual cost synergies of $52m.

It promises an “unprecedented investment cycle in fiber connectivity” across the US and European markets, where the two companies can more effectively – as one giant unit – better apply pressure on regulators and policymakers.

Driven by demand for last-mile fiber access and middle-mile transport, the respective product portfolios are thought to be highly complementary. Adtran specializes more in the hardware side of network technologies – supplying optical line and network terminals, routers, switches, gateways etc. – while Adva is well-versed in network virtualization and orchestration software, plus synchronization, packet edge and aggregation technologies.

Of course, Adtran is still active in the Gfast space (the period from G.fast was dropped a while back), and now this DSL protocol network extension technology is being pushed towards optical network units (ONUs) purpose built for fiber extension, although fundamentally the technology for local loops works in the same way. Adtran once had three, if not four, concurrent fixed broadband strategies in mind – G.fast over twisted pair, G.fast over coax, G.fast for fiber, and fixed wireless 5G.

While Adtran’s Gfast ONUs are designed to use existing copper or coax wiring in buildings, primarily multi-dwelling units (MDUs), to make it cheaper and less disruptive to bring symmetrical gigabit broadband speeds to residents, Adtran’s product portfolio is about to get a fiber overhaul. Yes, the window of opportunity has been closing for Gfast in highly developed markets with high fiber penetration, yet there are likely milllions of MDUs still ripe for the taking in less developed regions. The question is whether the newly merged entity will bother channeling efforts and resources into targeting these markets, or go all-in on US and European fiber?

The press release certainly implies the latter strategy, but with the merged company adopting the stronger Adtran brand in broadband, it could go either way.

So, what does the deal mean for the competition? According to analysts at investment banking firm Raymond James, they do not envision any material risk to rivals such as Ciena, Infinera and Nokia, although the newly merged company could be set to snatch market share away from Huawei. They also noted that the targeted cost synergies of $52m are achievable, but there is less confidence in sales synergies.

Orange Poland is a notable name to have boosted its FTTH footprint with the deployment of Gfast fiber extension technology from Adtran, while UK-based service provider Openreach earlier this year rolled out Adtran’s SDX Series fiber access platform and Mosaic Cloud network automation platform, as part of its first GPON-based fiber network.

There is indeed life left in Gfast yet, particularly at smaller regional operators. NetCologne in Germany is a prime recent example, rolling out Gfast technology from Nokia last year to its half am subscribers, upgrading 30,000 FTTB premises from VDSL2 to Gfast technology in the last drop.

Nokia insisted this was not a routine Gfast deployment, as NetCologne became one of the early deployers of SDN-enabled Gfast products, adding the Nokia Altiplano platform on top to automate operations across the entire access network and provide a portal for insights into operational data. The SDN-based Altiplano Access Controller brings simplified provisioning and reduced costs of operations via open programmable interfaces and intent-based networking, which Nokia also highlights as having portability for future network evolution.

One of Adtran’s biggest deals in recent years was the Australian national broadband network, nbn, which was a car crash at times as the project flipflopped between full fiber and technologies such as Gfast, eventually opting for a mix and match approach involving numerous vendors – sending it grossly over budget and significantly behind schedule.

Now, with major operators in the USA and Europe investing in expansive fiber infrastructure build-outs and governments issuing increasingly generous subsidies, new Adtran has a huge fiber opportunity – particularly taking into account the pushback on Huawei equipment outside China.