Don't Kid Yourself

Out of the shadow that is the national economy, there's a glimmer of good news. CTIA just released its mid-year 2001 data survey results, which reveal a measurable uptick in the number of minutes people use their wireless devices.

“Wireless technology is no longer an ancillary service,” said Tom Wheeler, CTIA president & CEO. “It is now a full-fledged alternative to wireline and the usage numbers show it. People are depending on their wireless devices more than ever, and we expect that trend to continue as more data services are available.”

The highlights of the study reveal that there were approximately 200 billion billable minutes of use (MoU) for the first half of the year, up 77% from June 2000, and up 34% from December 2000. This was accompanied by an increase in subscribers of 22% from 97 million in June 2000 to 118.4 million as of June 2001.

Carriers reported total cumulative capital investment of $99.7 billion, which is up 30% from $76.7 billion in June 2000. Total revenues rose almost 26%, from $24.6 billion to $30.9 billion for the first half of the year.

However, these are not times for rose-colored glasses. Digging deeper, there are key vectors to watch.

Yes, MoU are up. However, with the carriers' bucket packages, it doesn't immediately translate into revenues. A subscriber with a 1,000-minute package may be using more or all of his minutes, but is still only paying the same $59.95 monthly fee. In truth, carriers are loading their networks more heavily with traffic.

This is further supported by 3Q results in which carriers noted the increase in wireless usage surrounding the Sept. 11 attack, yet said it didn't materially affect their figures.

With heavier traffic flowing through carrier networks, carriers must continue capital expenditures to maintain quality of service. The recent relaxing of spectrum caps will help some carriers feeling greater capacity pains. But it's not the cure-all.

Although CTIA's good news data is a pleasant change of pace, let's not kid ourselves. Tough times still are ahead.

Ericsson, which has already laid off nearly 26,000 employees, said there are still more layoffs on the way so it can maintain better than 5% operating margin for 2002.

The beleaguered Teligent told a bankruptcy judge that its potential buyer fell through, and it will have to cut 60% of its remaining staff and discard most of its customers.

Japanese carriers such as KDDI are beginning to show weaknesses in their quarterly earnings. European carriers too are feeling economic quivers. Both of these reactions could signal similar near-term declines for U.S. carriers.

The next step, particularly in the coming quarters, is for carriers to lure subscribers into increasing their monthly spending by adopting wireless data services. However, with consumer confidence and spending plummeting in the United States, that could be easier said than done, even with killer apps like wireless e-mail and instant messaging.

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