Yesterday, U.S. President Barack Obama has endorsed a wireless spectrum hike plan proposed by Federal Communications Commission (FCC). As a result, currently available spectrum (airwave) will be nearly double for the use of wireless broadband services and increased Internet connectivity. FCC together with the U.S. Department of Commerce will identify unused airwaves to raise the available spectrum size to 500 MHz in next 10 years.
We believe Tellabs Inc. (TLAB) will be highly benefited by the wireless broadband thrust of the U.S. government. Massive demand for high-speed mobile data and video services resulted in rapid growth for wireless backhaul and optical transport products. In synergy with this trend, Tellabs’ next-generation advanced IP-access (growth) products are receiving increasing market traction.
Recently, Tellabs’ 7100 OTS and 7100 Nano OTS received RUS (Rural Utilities Service) acceptance certificates to provide high-bandwidth services. Tellabs 1000 and 1100 Multi-service Access Series and the Tellabs 8800 Multi-service Router already gained RUS certifications. FCC’s National Broadband Plan is mainly aiming to provide affordable wireless broadband services in the untapped rural markets. Tellabs will definitely benefit from this wireless infrastructure drive.
Tellabs has decided to substantially focus on the growth areas of mobile backhaul solutions, optical networking solutions, and business services solutions. The company is in a position to benefit over time, as large carriers started implementing next-generation high-speed networks that require advanced IP access and data transport system.
Successful integration of SmartCore platform of newly acquired WiChorus may generate sustainable long-run growth opportunity for Tellabs as mobile data traffic is expected to grow 30%-50% a year for the foreseeable future.
We maintain our Neutral recommendation for Tellabs. Currently, it is a Zacks Rank #3 (Hold) stock.
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