Amidst the furor over Icahn's bid for the company, XO Holdings (news, filings) announced today the further expansion of its longhaul network. That network, built on 18 fibers of the original Level 3 build that the company acquired back in the bubble, has seen a steady stream of capex devoted to it over the last few years. This time they will be deploying the ILS2 system of Infinera (NASDAQ:INFN, news, filings), which supports up to 160 wavelengths on a single fiber.
The upgrade is no doubt happy news for Infinera, which like other equipment providers has seen revenues recede in the face of industry wide capex reductions and whose largest customer, Level 3, is rumored to have done a recent deal with Huawei - although details are unclear. While they have been picking up new customers as well, in this environment there's nothing quite like a nationwide upgrade by an existing customer willing to spend real dollars.
Is XO really selling that many wavelengths? It's hard to tell from their gross financial results, as their wholesale longhaul business is not broken out. But their "Core Broadband" revenues have advanced steadily over the last year or two, offsetting declines elsewhere. Given their willingness to spend this much capex on DWDM gear, we can guess that growth intercity waves and private lines must be a big part of that growth. Big enough to be part of the storm hitting Level 3's wholesale markets division perhaps?