Slowdown
Revival Peeps In

Industry reports point out that the much awaited revival may not be far off.

 

Highlights

l Valuations of telecom companies were hit by reasons such as the dot-com implosion

l Gartner Dataquest has forecast 6 percent growth in 2002

 

By the end of 2001, the global telecom equipment market is believed to have shrunk by over 4 percent—the most dramatic decline in the industry’s history.  However, the sunshine does not seem to be far away: the last quarter results of telecom companies indicate a comeback in 2002.  A recent study by Gartner Dataquest forecasts 6 percent growth in 2002.

The report, ‘Telecom Markets and the Recession: An Imperfect Storm’, estimates that the telecom services business grew by 13 percent by year 2001-end.  This growth will more than offset the decline in the equipment market.

It Deserved Better

Telecom is a key infrastructure for growth and is known to directly contribute to the country’s GDP growth.  It was difficult to appreciate the sudden lack of confidence in the telecom, especially by the stock markets. However, going by the recent stock market behavior, the confidence in telecom appears to be returning back.

Oddly enough, even the dot-com implosion impacted telecom:

l Markets had to adjust to the fact that e-commerce could not grow at 400% p.a. (poor infrastructure has to be partly blamed for that).

L Venture capital was severely curtailed and moved towards profitability.

L Telecom services and other startups were forced to focus on short-term return on investment.

L Telecom equipment vendors—geared to meet the huge increase in demand—were caught with excess inventory costs as the rapid increase in demand failed to materialize.

War on Terror: Boost for Mobile

Not surprisingly, the industry seems to have received a boost from the recent terrorist attacks and the global ‘war on terrorism’. Worldwide, mobile phone sales have risen and the major operators’ stocks seem to have bounced back. Even the satellite phones have seen surge in sales and usage. For instance, Iridium and Globalstar shot into prominence after the attacks on the World Trade Centre and Pentagon, when fixed as well as mobile networks collapsed through a combination of damaged infrastructure and traffic congestion. That week, Iridium’s system utilization was up by 25 percent and new activations were four times those of the previous week.  Besides, over 1,200 handsets were given to relief workers in New York.  Globalstar too saw usage shoot up, selling several hundred phones in New York alone.

Asia-Pacific Growth

Although North America and Western Europe have been hit hard, Asia-Pacific—especially China— continues to grow. 

The telecom services market have shown growth in all regions in 2001 and is expected to continue to do so through 2005.  Although the market for fixed, circuit-switch voice services seems to have matured, strong growth in data services, packet voice and mobile services sectors will drive overall growth to more than 10 percent per annum.

Also, telecom services should be generally less affected by economic cycles as compared to other sectors. One eagerly looks forward to that!

 

By  Niraj K. Gupta, "from my cell", Voice & Data, February 2002