EoW January 2010

Transat lant ic Cable

Landline giants AT&T and Verizon now see their future in mobile networks and devices For their part, the US telecom titans AT&T and Verizon Communications – which might have been expected to trim their sails during the recession – are likely to register a combined total as high as $35 billion in capital investment last year, about what they spent in 2008. According to their chief executives, hopes of a return on that investment rest squarely on the companies’mobile networks. The loss of interest in their landline businesses is absolute, if Ivan Seidenberg can be taken at his word. The Verizon CEO told a Goldman Sachs investors conference in New York in the fall, “I don’t care about that any more” – that being the traditional area in which Verizon made its name and its fortune. Equally emphatic about his company’s commitment to wireless, AT&T chief Randall Stephenson said he expects new electronic devices geared to mobile access to open up additional revenue streams. “We’re investing very, very hard in this area,” Mr Stephenson said. “The next wave of growth in the industry is centered around the concept of mobility.” Indeed, in the very week of the Goldman conference AT&T announced a deal to include mobile-Internet access in a new GPS navigation device produced by Garmin Ltd. Incorporated in the Cayman Islands and based in Kansas, Garmin has its largest operating subsidiary and primary production facility in Taiwan. Jeffry Bartash, who follows telecommunications from Washington, DC, wrote in the Wall Street Journal (21 st September), “The way [Messrs Seidenberg and Stephenson] see it, consumers and businesses are increasingly willing to spend more on wireless data and Internet service as long as the carriers can meet their need for greater speed and reliability.” Mr Bartash saw few signs that the AT&T and Verizon ❈ ❈ executives feel threatened by smaller rivals offering lower prices but less attractive handsets and more limited networks. AT&T has exclusive US rights to sell the Apple iPhone – a tremendous asset even if the phone’s popularity has the company straining to ease network congestion. Verizon benefits from its reputation for running the network widely considered to be the best in the country. To maintain that commanding lead, the two companies plan to spend billions of dollars over the next few years to migrate to LTE (long termevolution) wireless technology, whichpromises to handle more Internet traffic at much faster speeds. “The whole idea here is for us to not take our foot off the gas,” Verizon’s Ivan Seidenberg told the investors gathered in New York. “And we will not take our foot off the gas.”

Telecom

Showing modest gains, third-quarter results hearten badly battered equipment makers The most recent earnings report from Tellabs (Naperville, Illinois) is one of several signs that the worst of the slump in spending for telecom gear may be ending in the US. The designer and maker of telecom equipment for service providers said its revenue went up 1% in the third quarter from the previous quarter, a small but significant rise and the second straight uptick. As noted by Olga Kharif, a senior writer covering technology for BusinessWeek.com, Tellabs has some way to go: third-quarter revenue was 8.3% lower than in IIIQ 2008. Even so, she took its latest report as indicating that the telecom gear market may be in tentative recovery. The industry was badly jolted in 2008 when enterprises slashed spending on networks, and phone providers curtailed investment in systems that deliver communications services. (“Piecing Together a Telecom Gear Rebound,” 26 th October) Ms Kharif cited other third-quarter results supporting a turnaround. Juniper Networks (Sunnyvale, California), a maker of networking equipment, said its sales rose 5% from the previous quarter. And Infinera, another Sunnyvale-based company, reported a 21% sequential sales increase and a 3% gain from a year earlier. “It looks like the first half of this year was the bottom,” Infinera CEO Jagdeep Singh told Ms Kharif. “It looks like we are in the early stages of a recovery.” Infinera makes equipment used in fibre optic networks in metropolitan areas. The view of the broader market for wireless and wireline equipment is even more encouraging. The market research and consulting firm IDC (Framingham, Massachusetts) thinks carriers trying to improve their networks after delaying some upgrades may push second-half spending as much as 8% higher than that in the first six months of 2009. Moreover, Ms Kharif pointed out, demand for telecom ❈ ❈ equipment may also be spurred by the government stimulus package aimed at improving broadband access in the US. Washington has earmarked about $7 billion in broadband spending so far, and Federal Communications Commission chairman Julius Genachowski said the agency is also looking at ways to boost non-government spending, too. In a discussion of regulations for an open Internet as well as other telecom and technology topics, he said, “There is no question that it will take a lot of private investment to do what’s necessary.” Many industry insiders note the obvious: that spending on telecom equipment could recede again if the larger economic recovery falters. Customers “will be conservative at the beginning of the year, just to make sure we don’t hit the double dip,” Kim Perdikou, an executive vice-president at Juniper, told BusinessWeek.com. “Now they are very strategically pinpointing where the revenue growth is and spending in those areas.”

Automotive

GM moves to shed more than one-third of US Saab dealers as the brand is sold, unsold, and goes back on offer – pro tem In mid-November, Saab was waiting out the preliminaries of its sale by General Motors to the Swedish supercar maker

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EuroWire – January 2010