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AT&T's (NYSE: T) consumer wireline segment continues to be driven by U-verse growth and the first quarter of 2014 was no exception, with revenues growing 28.3 percent year-over-year to $3.5 billion.

John Stephens, senior executive vice president and CFO for AT&T, said during the first-quarter earnings call that "we transformed our wireline business from legacy services, such as DSL to IP networks and IP services," adding that "this transformation helped drive our strongest consumer wireline growth in years."

However, there were some losses. Overall wireline revenues declined 0.4 percent year-over-year to $14.6 billion, but wireline service revenues rose 0.1 percent year-over-year.

Due to U-verse content price increases, expected POTS voice revenue declines and success-based growth and costs incurred as part of Project VIP, AT&T's wireline operating margin was 10 percent versus 11.1 percent in the year-earlier quarter.

Here's a breakdown of AT&T's wireline metrics, which were dominated by gains in U-verse and strategic business services growth:

Consumer Revenues: Consumer wireline revenue was $5.7 billion, up 4.3 percent from the same period a year ago, representing what the company said was "the strongest consumer revenue growth since the introduction of U-verse eight years ago." Growth in consumer IP data service helped to offset lower legacy voice and data products.

U-verse now represents 60 percent of AT&T's wireline consumer revenues, up from 48 percent in the year-earlier quarter. Consumer U-verse revenues grew 28.3 percent year-over-year.

Broadband and Video: AT&T saw U-verse subscriber adds drive broadband growth during the first quarter. During the quarter it added a total of 634,000 U-verse broadband and 201,000 U-verse TV subscribers, ending the quarter with a total of 11 million and 5.7 million subscribers, respectively. Total U-verse high speed Internet subscribers now represent more than two-thirds of all wireline broadband subscribers, compared with 51 percent in the year-earlier quarter. Overall total broadband subscribers rose by 78,000.

Interestingly, nearly 60 percent of U-verse broadband customers subscribe to a 12 Mbps or higher plan. Besides taking a higher speed broadband product, AT&T said that 90 percent of new U-verse TV customers also signed up for U-verse high speed Internet. Nearly two-thirds of AT&T U-verse TV subscribers purchases three or four services. These factors drove up wireline ARPU 9 percent year-over-year to more than $170 a month.

"We also see the transformation in our broadband results," Stephens said. "More than two-thirds of our total broadband base are about 11 million subscribers are now on U-verse broadband, highest speed and highest quality product."

Another potential key factor of future broadband and video growth will come from its GigaPower fiber to the home (FTTH) service. Following the success of its initial build in Austin, the telco announced on Monday that it is planning to expand its U-verse GigaPower service to up to 100 cities and municipalities, including 21 major metropolitan areas.

Stephens said that what made the process in Austin work was it was able "to get kind of right way, and permitting and pull rights and other rights to build in the same manner as other companies which we haven't had historically," adding that "we're able to focus our build on the customers that drove demand as a oppose to the ubiquitous coverage."

The next step for AT&T will be to begin discussions with community leaders to find ways to streamline the permitting process for rights of way and access to public infrastructure such as utility poles.

"We're very opportunistic, optimistic I should say about those markets and believe we're uniquely positioned in many of those markets because the existing backbone we have in many of those markets," Stephens said.

Business Services: While overall business services revenues declined 2.7 percent to $8.7 billion, declines in legacy products like ATM and Frame Relay were partially offset by continued double-digit growth in strategic business services. Next-gen IP services such as VPN, Ethernet, cloud, hosting and other advanced IP services grew 16.1 percent year-over-year. These services represent an annualized revenue stream of more than $9 billion and are more than 26 percent of wireline business revenues. U-verse broadband was once again a factor in the small to medium business segment. During the first quarter, the telco added 64,000 business U-verse broadband subscribers.

"Overall revenues were down year-over-year in line with the slow economy and recent trend, but there are positive signs," Stephens said. "In enterprise, our global business services we actually showed slight service revenue growth year-over-year, given recent headwinds that seemed as very positive."

Stephens added that wholesale had a large impact on the overall business service revenue decline, particularly "as wireless carriers aggressively decommissioned the legacy circuit" like copper-based T-1s and replaced them with fiber-based Ethernet services.

From an overall financial perspective, AT&T reported consolidated revenues of $32.5 billion, up 3.6 percent or more than $1 billion over the first quarter of 2013, which it said "was the strongest growth in more than two years."

The telco also reported 70 cents of diluted earnings per share (EPS), up from 67 cents diluted EPS in the year-ago quarter.

AT&T's shares closed at $36.29, up 23 cents, or 0.64 percent at the end of Tuesday trading on the New York Stock Exchange (NYSE).

For more:
- see the earnings release
- here's FierceCable's take
- and the earnings transcript (reg.req.)

Special report: Wireline telecom earnings in the first quarter of 2014

Read more about: IP VPN, Uverse, FTTH
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2. Maine Fiber Co. says middle mile network audit is completed, sees growth in dark fiber leasing

By Sean Buckley

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Maine Fiber Company (MFC), the owner and operator of Maine's "Three Ring Binder" middle mile network, announced that BerryDunn has completed its audit of its Broadband Technology Opportunities Program (BTOP) grant.

The completion of this audit, which is a major milestone for what has been a somewhat controversial project, has now been forwarded to the Office of the Inspector General (OIG).

When it originally was awarded the grant in 2009, it got $25 million to partially fund the 1,100-mile fiber network, which spans the entire state from Fort Kent to South Berwick. A number of MFC's investors provided $7 million in matching funds.

Over time, MFC built additional dark fiber routes to interconnect Maine with Boston and Canada.

MFC's Vice President of Business Development Jeff McCarthy said that the company "wanted to be sure Maine's newest fiber optic network was interconnected with international fiber networks, opening up better global connectivity options for Maine."

To date, there are already 24 customer agreements in place to lease fiber on the network.

However compelling the completion of the audit is, MFC has come under fire from competitive provider GWI, which claimed in a lawsuit that it did not use federal broadband stimulus properly to address rural broadband needs.

Fletcher Kitteridge, CEO of GWI, said one of its problems with MFC was its decision to bring its network into areas like Boston, which it claims were not part of the initial project scope.

For more:
- see the release

Related articles:
GWI accuses Maine Fiber Co. of misusing federal funds for statewide network
Maine wraps up construction of the Three Ring Binder middle mile network
NextGen Telecom Services to help build Maine Fiber Co.'s Three Ring Binder network
Maine's Three Ring Binder network gets underway
Maine's GWI extends broadband, voice service to Dover-Foxcroft and Calais

3. Juniper's Q1 revenue rises 10% to $1.17B, beats estimates

By Sean Buckley

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Juniper reported that first-quarter 2014 revenue rose 10 percent year-over year-to $1.17 billion, slightly surpassing its expectations. The vendor initially forecast first-quarter revenue of $1.12 billion to $1.16 billion and adjusted gross margin of 64.0 percent plus or minus 0.5 percent.

However, the company's operating margin declined 0.5 percent due to $122 million in restructuring and other charges. Taking out the one-time items, the operating margin rose to 17.2 percent from 15.7 percent. Meanwhile, net profit jumped to $110.6 million, or 22 cents per diluted share, from $91 million, or 18 cents a share a year earlier.

"Juniper delivered solid first quarter results with strong year-over-year revenue growth," said Shaygan Kheradpir, chief executive officer of Juniper Networks, in the earnings release. "We are seeing continued demand from our customers reflecting a significant opportunity to capture share in meaningful, high-growth Cloud-Builder and High IQ networking across both service provider and enterprise market."

The first quarter was a time of transition for Juniper. In response to shareholder pressure to trim costs, the vendor in February unveiled a new integrated operating plan (IOP) that includes cutting $160 million in operating costs by the first quarter of 2015 and returning capital to shareholders over the next three years. Earlier this month, it announced that it would lay off 6 percent of its employee base.

Stuart Jeffrey, an equity analyst for Nomura, wrote in a research note that while Juniper's IOP is sound, "it still has risks."

"Firstly, this strategy was articulated very early after the appointment of the new CEO," wrote Jeffrey. "Secondly, management is refusing to give any real details on the actual enablers of this strategy, other than to point out Juniper's existing array of assets, citing the need to protect competitively sensitive information."

Regardless of its issues, Juniper saw continual gains in its product and service sets. Driven by strong performance of the MX platform, including its new MX2020/2010 and MX104 lines, routing revenue rose 7 percent year-over-year to $550 million. Switching rose 46 percent year-over-year to $192 million, while security declined 2 percent to $134 million.

From a regional perspective, the Americas led the way with $681 million in revenue, while EMEA and Asia Pacific rose year-over-year to $296 million and $193 million, respectively.

Looking towards the second quarter, Juniper Networks forecast revenue of $1.20 billion to $1.23 billion and adjusted gross margin of around 64 percent, plus or minus 0.5 percent, and adjusted operating expenses at $520 million, plus or minus $5 million.

Shares of Juniper were listed at $24.70, down $1.19 or 4.6 percent, in morning trading on the New York Stock Exchange (NYSE).

For more:
- see the earnings release

Special report: Wireline telecom earnings in the first quarter of 2014

Read more about: Edge Router
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4. Dimension Data snaps up Nexus, enhances U.S. IT capabilities

By Sean Buckley

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Dimension Data has purchased all of Nexus, an IT network integrator, a move that deepens its presence in the U.S. and broadens its services portfolio for high growth vertical segments like education, retail, hospitality and healthcare.

By making this deal, Dimension Data will immediately expand its U.S. operations by 40 percent and increase its presence in the West, Southwest and Southeast regions. Today, Nexus has 19 offices in in California, Nevada, Colorado, Arizona, Utah, Washington, Texas, Georgia, Florida and North Carolina.

"For us, this acquisition is about growing the business," said Jeff Slaga, CEO of Dimension Data, in an interview with FierceTelecom. "Our goal is to grow from $1 billion to $3 billion in the Americas over the next five years and that's got to be based on strong organic growth as well as picking out a few select companies to partner with."

The benefit for existing and new clients is that they will have access to a broader set of expertise and portfolio of IT solutions.

Besides broadening the geographic reach and service capabilities, the acquisition will give it access to a larger set of clients. Nexus has traditionally served Fortune 2000 customers, while Dimension Data serves mainly Fortune 500 companies and up.

"We--with our global capabilities, our cloud and outsourcing capabilities--bring a lot to the Nexus clients," Slaga said. "They are also very strong in health care, state and local government, education and retail so they bring some solutions to our clients that can strengthen what we do."

Under the new management structure, current Nexus CEO Deron Pearson will report to Slaga and continue to lead the Nexus business. Meanwhile, Nexus President and COO Waheed Choudhry will continue to run Nexus's day-to-day operations, reporting to Pearson.

Slaga said that over the next 18 months they will bring "the two families together and ultimately it will be all part of Dimension Data under one brand."

This acquisition is part of a broader three-pronged strategy to increase its presence in three growth regions--United States, Europe, and Japan--via organic growth and targeted acquisitions. A key part of that strategy is focused on being on the top three market of a particular geographic region.

Its acquisition of Nextira One last December immediately enhanced its presence in the European market, for example.

For more:
- see the release

5. Buffalo officials, residents want Verizon to change its FiOS course

By Jim Barthold

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