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Wednesday, September 17, 2008

Financial market turmoil - impact on telecoms

James Enck has an absolutely heroic post on this topic.

As a former investment analyst myself, I've been watching this week's chaos on Wall St and in the Square Mile with a sort of detached horror.

And I've been watching tech & wireless stocks escape with (comparatively) little damage. Who would have thought, 7 years ago, that it would be banks' and insurers' turns in the firing line?

His comments about the gap between network operators' funding vs. necessary near-term capex are particularly interesting to me. Some additional thoughts:

- Now probably isn't a good time to be buying spectrum, especially if it's with the aim to build out entirely new networks. Maybe O2 & T-Mobile have, ironically, done both BT & the UK Treasury a favour, delaying the UK 2.6GHz auction through their legal action? Otherwise that would have been ongoing right now.
- I reckon that some particularly dongle-rich 3G networks are going to start feeling capacity squeezes over the next 12 months - a combination of the need to fire up extra 5MHz channels on existing sites, add new sites, and/or upgrade backhaul capacities. I hope all that's in the current spending plans....
- From a risk management point of view, all the signs are pointing more towards HSPA+ / HSPA Evolved as a cheap & safe interim step before LTE. If I was the CFO, I'd be asking exactly what LTE would add to the bottom line, and what the risks are that positive ROI might be delayed for a couple of years, because of "unexpected issues" like poor availability of devices and applications. I don't think the situation is going to do WiMAX or FTTH many favours in the near term either.
- I've talked about this before, but do mobile operators really want to start subsidising laptops at the current time? Given that a lot of the "Free Laptop!!! £30 a month subscription" deals look suspiciously like consumer credit arrangements, I hope you've checked your underwriters' fine print. And vice versa.
- I'm mindful of a new item I saw recently, saying that chocolate sales go up during recessions, as it becomes an affordable treat, chosen in place of more expensive luxuries like restaurants. There's a lesson there for certain "feel good" mobile services, surely.

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