- A merger will bring ADTRAN’s fibre access and ADVA’s WDM and data center interconnect capabilities together
- The companies expect their merger to be completed by mid next year
- The new company is to be called ADTRAN Holdings Inc.
ADTRAN and ADVA have announced they are aiming to merge to create “a global end-to-end fiber networking solutions leader”. If the deal goes through, the resulting US and Germany-based fibre specialist will offer both scope and scale. It will boast a combined annual revenue of $1.2 billion and, with its combined product range, a platform for “differentiated fiber networking solutions” spanning metro edge, aggregation, access and subscriber connectivity.
The timing looks good. The companies claim the merged entity is poised to benefit from a burgeoning fibre investment cycle as fibre access build is on a gallop in North America and Europe, as well as in parts of Asia-Pacific.
And with more fibre access (including 5G build-out) comes growth in fibre facilities in and between data centres (Data Centre Interconnect - DCI), an area that is very much ADVA’s speciality.
One of the key fibre network service challenges is to finesse end-to-end data network performance - which means essentially that access technology and data centre/cloud technology and multiple access protocols must play nicely together so that high throughput coupled with ultra-low latency can be engineered for specific applications.
So what sort of techniques can now be applied to finesse that end-to-end high-speed, low latency performance so sought after by telcos and their customers? According to Ronan Kelly, CTO for EMEA and APAC at ADTRAN in an email sent to TelecomTV earlier this year, one big breakthrough has arrived with the emergence of new broadband access equipment architectures and there now exists a unique opportunity to embrace native programmatic interfaces directly within the equipment.
“This opens up a world of opportunities for higher velocity service deliveries, which can serve as the foundations for new revenue streams in the future, while also strengthening the green foundations upon which most operators are seeking to build their sustainability strategies. By eliminating the need for complex translation layers to transcode between modern programming languages and legacy network management protocols, great efficiencies are achieved,” he claimed.
For instance, “The time required to onboard a new vendor solution can be slashed when the automation programmers can leverage a common interface to interact with the equipment directly,” he said.
A winning combination?
The merger will bring together ADTRAN’s fibre access, fibre extension and subscriber connectivity solutions with ADVA’s metro wavelength division multiplexing (WDM), data center interconnect, business Ethernet and network synchronization. As a result the combined entity appears to have a good chance of providing quality, end-to-end managed solutions and enjoying success with telcos in particular.
However, it’s fair to point out that telecom business combinations are notoriously tough to execute successfully and the sector is littered with M&A failures. This may part-account for an apparent lack of enthusiasm for the deal by investors who wiped about 16% off the value of ADTRAN shares during trading on 30th August to $20.51 (it has recovered a little during early Tuesday trading).
But on paper, at least, ADTRAN and ADVA are a good fit and the opportunities for business growth look healthy with investments in access network and metro optical network capacity surging as a major competitor (Huawei) in both sectors is faltering. On the upside, both companies have solid reputations for delivering quality products that do what they say on the tin.
The all-stock transaction will leave ADTRAN shareholders with approximately 54% of the combined company, and ADVA shareholders with 46%. ADTRAN shares will be traded for holding company shares on a one for one basis. ADVA shares will be worth 0.8244 new company shares. The transaction is expected to complete in the second or third quarter of 2022.
The combined company is to be dual-listed on the NASDAQ and Frankfurt Stock Exchanges and is to be named ADTRAN Holdings Inc. It will be headquartered in Huntsville Alabama with a European HQ in Munich.
Technology and culture
Both companies are long-time advocates of system disaggregation, and both already offer open architecture options to their customers while also retaining the traditional pre-integrated systems that network operators already know and trust, so together they can meet a broad range of next-gen fibre networking requirements.
There also appears to be a decent cultural fit. Both are focused on technical capabilities designed to meet the practical needs of their customers and neither are prone to blowhard marketing – ADVA, you could argue, has a history of being almost too modest. And there’s a German connection: ADVA is a German company, while ADTRAN expanded into Europe with the acquisition in 2011 of the Nokia Siemens Networks Broadband Access division (which was, in effect, the Siemens Communications fixed broadband access business).
In summary the combined entity offers the sort of scale which neither company could have achieved organically. While it won’t be anywhere near as big as the fibre access and optical business of its main rival, Nokia, it should give the new ADTRAN Inc greater muscle and a broader offering than fibre access rivals such as Calix and DZS (Dasan Zhone).
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