Clouds gather in carrier spending slowdown
Uncertainty in the overall economy has led large North American telecom carriers to grow increasingly conservative in their spending, a phenomenon that, according to some industry analysts, has intensified in recent weeks. As tension swells, equipment providers can only wonder when conditions will improve, but a pair of analyst assessments this morning provides scant hope for a quick recovery.
“Our discussions with carriers and vendors appear to indicate that we've taken another notch down in demand over the recent weeks,” Mark Sue, managing director of RBC Capital Markets, wrote in a research note this morning. “This cycle may last 12 months, if not longer.”
Though Tier 1 and Tier 2 carriers appear to be maintaining their near-term capex plans for now, Sue wrote, “The urgency may no longer be there, and we're already picking up signals of deal push-outs.”
Though consumer electronics purchases around the holidays may help stimulate the sector, the near-term environment could likely cause inventory backups for equipment vendors and heat up price competition in the wireless infrastructure space, Sue wrote.
Sue’s prognosis is particularly dour for Alcatel-Lucent -- which he predicted “will remain challenged for some time,” with weak cash flow likely extending to at least next year’s second half -- and for Nortel Networks, of whose recent move to try to sell its metro Ethernet and optical division Sue wrote, “The timing likely couldn't have been any worse.” In addition to macroeconomic forces, a deteriorating market for CDMA wireless gear is likely to impede both vendors, he wrote.
Morgan Keegan analyst Simon Leopold echoed many of Sue’s sentiments in his own note this morning.
“While our checks indicate that carriers have maintained budgets and project plans, they have become increasingly nervous,” Leopold wrote. “[Third-quarter] spending could be a bit light, and in [the fourth quarter], we expect less than seasonal sequential improvement in North American spending, with cable TV exposure as our preferred sub-sector.”
Want to use this article? Click here for options!
© 2014 Penton Media Inc.
In this Webinar you will learn how to create a real-time relationship with your customers, how to proactively improve the customer experience, and how to successfully target and cross-sell services to boost incremental revenue.
- Megabytes to Megabucks, Bandwidth to Business Models: How 4G Is Changing Everything
- How to Unplug Your Redundant Telco Apps To Save Money and Improve Efficiency
- When IaaS Isn't Enough: Service Provider Business Models to Drive Growth and Build Margin
- How to Transform Your Aging Telco Voice Network to Drive New Profits and Revenue
- Creative Licensing Approaches for Telcos & Their Network Equipment Vendors
- Smart Home Opportunity: Balancing Customer Data & Privacy
This paper discusses the rise of Diameter and benefits of Diameter Protocol.
- Conducting The Orchestration – Order Management at the Speed of Business
- Toward a Converged Network Edge
- Beyond Spam – Email Security in the Age of Blended Threats
- 6 Important Steps to Evaluating a Web Filtering Solution
- The Expertise to Protect You from Botnet and DDoS Attacks
- Seeing is Believing – Bridging the Order Visibility Gap
Service providers are under tremendous pressure to turn up new services faster then before and, at the same time,
to do it at less expense - and intra-office fiber is one of the biggest challenges in terms of both cost and service
From the Blog
Join the Discussion
Get more out of Connected Planet by visiting our related resources below:
Connected Planet highlights the next generation of service providers, as well as how their customers use services in new ways.Subscribe Now