Analysis Telcos – B’ring me sunshine.

Then the markets took fright. The corporates weren’t signing up fast enough. Too many companies were building pan-something networks, mostly running new fibre between the same old key cities. If telco manufacturers could now cram vast amounts of data and voice traffic down a single fibre pair, who needs dozens of telcos with thousands of strands of fibre? Competition saw the price of bandwidth on key routes tumble, and this played merry hell with the revenue model of the new age players. Every new analyst’s report revalued the sector downward still further. Then came the losses. The rest, as they say, is history. Today is not the time to be a new age telco needing second or third round funding to complete the build out of a pan-galactic network.

Then there’s the wireless issue. On top of all the e-work, the next monster wave of business, which consultancies, mobile operators and the telcos will most certainly be feeding off for years to come, is wireless data access to the corporate information resource. This should have been among the most exciting things to happen to corporates ever.

The opportunities for empowering every out of office worker are extraordinary. Instead of all those glitches in information flows that have plagued organisations for years, here at last is the opportunity to put the right information in the right hands at the very instant it is needed.

Yet what do we have? Global capital markets take fright at the mention of the T-word, regardless of how the phone connection is made. If you’re a traditional telco you’re damned by the weight of your legacy equipment and the huge modernising investment you doubtless still have to make. If you’re a new age telco you’re damned because the whole idea is dodgy. If you’re one of the front running wireless operators you’ve sunk yourself under a mountain of debt and proved your lousy judgement by overbidding for a 3G licence.

The money markets have always been subject to fashion trends, but it should be at least disconcerting that the money folk seem to have lost confidence in their ability to tell a good telco from a bad one, or a sound project from a lemon. This is not good. It is the markets’ job, after all, to sort the wheat from the chaff. Tarring an entire sector with the same brush looks like a cop out.

Talk to any analyst with some experience of the sector though, and what soon comes through is their irritation at the absence of any so called “killer application” – that “must have” something that will make every subscriber, including Joe Public and the corporates, spend an average of at least an extra 660 euros a year. So far there is no killer app in sight, unless you have great hopes for e-mail on the move, and until there is one the markets will keep on downgrading the sector.

There is nothing sacred about the figure of 660 euros per subscriber. It just happens to be roughly the amount of additional spend European mobile operators are going to have to generate, per subscriber, per year, to show a profit on their ridiculously overpriced 3G licences.

What is the driver for this additional spend? People accessing their share prices on line and dealing? Not likely, this is not America. Folk here invest in ISAs and unit trusts, when they invest at all. And they are in it for at least the medium term. Who needs by the minute wireless updates for an investment that matures in 2012? Football scores? They’re on the telly, on Ceefax, on the radio, in the papers and, or can be sent direct to old style 2nd generation GSM phones, via SMS. People don’t need to buy into GPRS wireless data services for this. They may, but they don’t need to.

The corporate issue is much more promising, with the potential applications limited only by the imagination. However, in the current climate, not too many money men are interested in flights of fancy. Until corporates actually begin signing substantial contracts with systems integrators and wireless operators, this whole sector will continue to have a question mark hanging over it.


– Loss-making Swedish telecoms equipment maker Ericsson does not see any signs of improvement in the market, said a senior Ericsson official. Ingemar Blomqvist, who oversees the company’s ambitious restructuring programme, told Ericsson’s Contact weekly gazette: “It is important that we continue with efficiency measures … We are only at the beginning of the efficiency programme, and we still do not see any improvement in the market.”

– A senior BT executive has slammed the idea of accepting a bid for its local loop. And the carrier is believed to be on the verge of awarding a major contract for the upgrade of the access network. Pierre Danon, the head of BT’s retail division, claimed that the idea that BT would sell its local copper network was ludicrous. Danon, who is tipped to succeed group chief executive Peter Bonfield, appeared to be the first senior BT executive to speak out against the idea.

– Corning, the world’s largest fibre-optic cable maker, is to cut 1,000 jobs from its fibre unit, and plans short-term shutdowns at two North Carolina facilities in response to slack demand. In addition, the company expects overall market growth for optical fibre in 2001 to be significantly less than the previous forecast of 15%.

Related reading