UBS: US telco spending could drop 10% in 2009
Spending among US telcos could drop 10% or more next year, according to UBS analyst Nikos Theodosopoulos, who had previously predicted only a 5% drop. Spending among US cable companies, he wrote in a note today, could drop 5% to 10%. And domestic wireless spending could drop 7%, in line with his earlier prediction.
In particular, Theodosopoulos thinks AT&T could cut wireline spending 10% or more next year, though he had previously predicted just a 4% cut. Those numbers approximately match his adjustment for US wireline spending in aggregate. AT&T’s spending is particularly important to equipment vendor Ciena, for example, which gets more than a quarter of its revenue from the big carrier. But another AT&T supplier, Adtran, might fare better than the overall market, Theodosopoulos wrote, due to momentum from its newest products and because its legacy gear is well-positioned with the somewhat-less-bleak wireless sector.
Last month, Infonetics Research revised its carrier spending expectations in light of the souring macroeconomy, projecting a 2% decline in carrier capital expenditures worldwide, led by especially big cuts in Asia. A flat 2010 will follow, Infonetics said, and slight growth will come in 2011. North America – like Europe, the Middle East, and Central and Latin America – will see low to mid-single digit capex cuts in 2009, Infonetics said then, “because service providers there are already operating at moderate to low capital intensity (the ratio of capex to revenue).”
Last month, Infonetics noted that large service providers were already pulling back on VoIP equipment purchases. UBS’s Theodosopoulos today suggested that US telcos in general will curb spending on “non-strategic” projects, and he singled out video as one area likely to see cutbacks.
Concerns over carrier spending related to larger economic trends have swelled in recent months. In September, Ciena lowered its expectations for the fiscal year, citing a slowdown in spending among the largest carriers. Weeks later, it reported the trend had begun to spread to mid-sized carriers and enterprises. As other vendors reported similar experiences, most insisted that purchases weren’t being cancelled, just slowed or postponed. Today’s assessment from UBS, however, suggests that the same won’t be true next year.
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