Carrier Chiefs Confident on Outlook, but Analysts See Crisis
Chief executives of major U.S. carriers said telecom is insulated from the credit crisis. Analysts disagreed, cutting their estimates on carriers’ Q3 earnings. Meanwhile, growth came in flat-rate markets, VoIP and other converged business, as more consumers dropped landlines, analysts said.
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Clearwire believes its WiMAX consumer and business units, and much of the rest of telecom, will emerge from the crisis unscathed, CEO Ben Wolff said on a Fierce Wireless webinar. But obtaining more funding for the Clearwire WiMAX venture might be a challenge in the tight credit market, he said. The network buildout isn’t pressing, giving the company and its partners considerable flexibility, Wolff said. Another $2 billion will be raised for a full national WiMAX rollout, he said.
Wolff’s optimistic outlook was presaged by Verizon CEO Ivan Seidenberg and Sprint Nextel CEO Dan Hesse at earlier events (CD Oct 9 p4). Seidenberg believes people will spend money on wireless and broadband services even if they're down and out financially, a spokesman said. AT&T and T-Mobile won’t comment ahead of their earnings announcements, company representatives said.
Analysts predicted that the downturn will take a toll on the carriers. Sprint will see churn rise from 2 percent in Q2 to 2.3 percent in Q3, research firm Cowen and Co. predicted. But the carrier’s large spectrum holding and its work cleaning up 800 MHz holdings used for its iDEN network should help it in the long run, Cowen said. Bernstein analyst Craig Moffett cut his earnings estimates for AT&T and Verizon, saying they will suffer from lower customer spending, particularly by businesses and by consumers who continue to drop landlines for mobile phones. T-Mobile’s coming launch of its Android-based phone will help the carrier’s Q4 results, Cowen said.
A trend among households to rely on other technology -- wireless or cable TV -- for home phone service could accelerate landline losses, said Baird Research analyst William Power. VoIP blogger and Comunicano CEO Andy Abramson agreed that consumers either will cut the cord and keep only mobile phones or look for landline alternatives. He expects more to switch to VoIP, he said. Verizon and AT&T already are moving wireline customers to their FiOS and U-Verse platforms, which offer Internet, phone and TV service, Abramson said.
Flat-rate wireless providers like MetroPCS will be next year’s high fliers, Abramson said, citing that carrier’s Q3 subscriber growth. MetroPCS posted 935,000 net adds, 39 percent more than a year earlier. The figures indicate that Americans are looking to low-cost, flat-rate cellphone plans to trim expenses, said David Weissman of Zacks Investment. Abramson agreed, saying small and midsized wireless providers may see stronger growth than major carriers.