Hope for the Best, Expect the Worst

Every day now, it seems, another wireless company cuts workers, downsizes or files for Chapter 11.

According to a July report by out-placement firm Challenger, Gray & Christmas (www.challengergray.com), at least 130,442 jobs in the telecom industry were cut in the first half of 2001 — 19 times the amount cut in the same period last year. Telecom-sector losses account for nearly 17% of the 777,363 jobs lost through July 2001.

Despite the deepening decline in tech-related jobs, John Challenger, Challenger CEO, said the good news is that the jobs affected most by downsizing still are in demand.

In fact, many analysts say the economy isn't so bad — those who lose jobs often find others available, especially in the high-tech sector. It certainly isn't good enough to mean that no one will spend the summer, and possibly beyond, unemployed.

In an unofficial poll on WirelessVendors.com, an online community, about 42% of respondents reported layoffs, and almost 11% said things were so bad they have considered selling hotdogs.

Maybe they can work for carriers. CTIA (www.wow-com.com) reports that the number of wireless-carrier employees has increased. In 1999, U.S. carriers employed 155,817, according to the CTIA's annual wireless industry survey. Last year, they employed 184,449.

So far, carriers seem immune to the slowdown. But how is wireless data faring?

“Cingular Wireless is not seeing any effects of the economic slowdown in adding wireless customers to either our voice or data services,” said Dave Williams, Cingular (www.cingular.com) vice president of strategic planning.

According to Aldo Morri, Strategis Group (www.strategisgroup.com) senior consultant, carriers don't have much to worry about right now. Spectrum shortage, especially for GSM carriers, is a much bigger problem than the economy.

But the downturn has made it difficult for vendors to get financing. And that may delay the build-out of next-generation networks and offerings such as location-based services, he said.

“If we still were in the period of incredibly hyper-inflated growth and expectations, even then it would be difficult,” Morri said. “But particularly now there's less money, and these things are probably going to get delayed. But they're going to happen; it's just a matter of time.”

In The Strategis Group's July U.S. Telecom Market Index survey, 94% of telecom executives who responded said the industry will begin its recovery within the next 12 months. (See Figure 1.) The index, which surveys executives quarterly to determine the effect of the U.S. economic downturn on the industry, also revealed that 84% of respondents believe their organization's sales actually will grow by about 69%.

Nonetheless, almost two-thirds (63%) indicated that the state of the economy has affected their businesses negatively. And 81% said things will get worse before they get better, with more layoffs, bankruptcies and consolidation. And if there's a full-blown recession, Morri said wireless data will suffer.

“If it gets worse, there's going to be slower (wireless data) adoption by business, and that's where all these things come out first,” he said. “Everything from shoe sales to wireless-data sales will probably be affected.”