What: Shares of Inteliquent (IQNT) jumped as much as 30% higher on Tuesday morning, as the telecom back-end network announced a new contract with T-Mobile US (TMUS -0.45%).
So what: In a three-year agreement, Inteliquent will provide IP-based connection services to T-Mobile. With very few exceptions, allowing for existing contracts between T-Mobile and other voice interconnection providers, Inteliquent will become the wireless network's sole provider of such services. For T-Mobile, this is a next-generation solution that simplifies the company's network design and should improve the reach of its HD Voice services.
Now what: According to Inteliquent, this is a first-of-its-kind kind of deal. The company has been providing IP interconnect services between the wireless carriers for years, and also provides a nationwide backbone network between local landline providers. But this is the first time Inteliquent links up a wireless network with all other types, including hardwired local exchanges.
Chief Technology Officer John Bullock sees this type of deal expanding his addressable market by "billions of minutes of additional traffic." Based on this significant business development, the company raised its full-year revenue outlook from roughly $225 million to $245 million. Wall Street analysts thought that the old guidance was too optimistic, leaving their consensus estimates at $221 million.
Inteliquent also doubled its capital expense forecast to approximately $25 million, in order to support T-Mobile's incoming voice traffic surge. All things considered, management's view of full-year EBITDA profits stayed firm at $79 million.
The stock set fresh five-year highs before backing down to a 24% one-day gain. Inteliquent shares have surged 930% higher in less than three years, bouncing back from a severe strategic transition that nearly emptied the company's cash coffers amid swooning sales.
Landing T-Mobile's entire interconnection business is not just a great injection of short-term revenues, but also sets the stage for further contract wins. Being good enough for this ambitious and fast-growing network should be a selling point in other negotiations.