Nov 17, 2008 12:00 PM,

Gazing into the crystal ball

By Alex Liu

“When there is blood in the streets, buy real estate.” In the last few months, we have all witnessed the widespread financial panic that this old adage refers to, but few companies appear bold enough or well-positioned enough to take advantage of current investment opportunities — even if they could get the funding. However, the best competitors soon will peek out from the rubble and consider where to place future bets.

Musical chairs in wireless mergers

Every sector is still in play. Continued hyper-competition will push a few lapsed transactions past the economic tipping point. In prepaid, the market push as AT&T and Verizon enter this segment will push Leap and MetroPCS to finally forge a more formal combination. The same will hold true in push-to-talk, which will drive Sprint to spin off former Nextel, as well as push for a further carve-out/buy-in of WiMAX to increase the industry scale of the business.

Barbarians at the gate via increased foreign investment

Timing is ripe for a new intruder in North America. Semidistressed assets as well as rising stars overseas make this likely. Look at well-financed and visionary players such as Carlos Slim, Deutsche Telekom or SK Telecom to make a move on some combination of well-respected but troubled brand icons such as AOL, Alcatel, Motorola, Nortel, Sprint, or Yahoo!

Portal of choice turns out to be — surprise! — mobile handsets

It's not a surprise; it's been a long time coming, and Apple was the latest provocateur. When you get to well over 1 billion in installed base, you start to redefine personal communications. When Google, Nokia, RIM, Samsung and Sony all come after Apple with both guns blazing on multimedia and their ecosystems, you have a total sector in the passing lane (and the iPhone becomes less iconic).

Quad play loses its strategic luster

The soft spots are being exposed. The game has shifted from bundles to high-speed/functionality and all-you-can-eat pricing. The way to keep churn down is not simply to redistribute discounts while bolting on wireless and pay-TV packages. Competitive advantage will come from beating cable to specific local markets and upselling higher access speeds, as Verizon is enjoying. The more visionary integrated telcos already are drawing up spin-off plans for their wireless businesses, as the cable battle reaches DEFCON 4.