Oct, 2001 : Short-Term Outlook for Telcos Bleak, Analysts Say

📅 October 13, 2001 - Major North American telecommunications firms are facing lowered revenues in the face of a rough economic climate, according to industry analysts.
Two telecom analysts said this week the short-term outlook for telcos is bleak, thanks to low consumer confidence and reduced capital spending.
"We have unilaterally lowered numbers across the board in our models to reflect a likely weak economy through the middle of 2002," reads a report released this week from influential research and investment house Salomon Smith Barney. "Having said this? telecom will probably still grow in the low-to-mid single digits inclusive of all services - voice and data, local and long distance.
"Telecom is less economically sensitive than most industries, but not immune."
Some within the industry had expected the events of September 11th might help the bottom lines of telecoms, particularly with phone sales and usage surging ever since. Not so, says SSB.
"While there might be somewhat of a "blip-up" in cellular phone sales, or there could be some instances of video conferencing replacing travel, those are short-lived phenomena."
SSB also believes the tragic events of September 11th will cause many firms to re-think their strategic approach to data management and communications.
"Large corporate enterprises will, we believe, increasingly use network-based services to do things like: virtual-call center applications, traffic-load and management of frame-relay and ATM networks, distributed storage on the networks of the major carriers, and other types of disaster recovery type of services," the report said.
Credit Suisse First Boston analyst also believes data-related revenues and growth at telcos will slow in coming quarters, according to Retuers. The news service said this week that CFSB expects growth in DSL service will slow, with Baby Bells adding only 405,000 DSL customers in the coming quarter, down approximately 52,000 customers from the previous quarter.
According to Salomon Smith Barney, however, the long-term belief for telcos is that consolidation and regulatory issues will work themselves out, and when the dust settles, the economic landscape for telcos will be much more solidified. "The events of September 11th probably slow, in absolute terms, telecom growth," the company said. "But clearly, on a relative basis, the telecom services sector is in far better shape since there is positive growth and a more rational industry structure emerging."