I am curious what you think QCOM's 3-5 year growth rate will be (EPS, revs for QTL, QCT). I am beginning to think IJ's concern over delays in a W-CDMA rollout may be more than just wistful longing for a bigger cdma2000 market. The carriers are already extremely leveraged, and there is righteous doubt of their being able to finance the 3G buildout according to what may be the most convenient schedule for QCOM.
There might be hell to pay in England (literally), but now that the auction hysteria has cooled down a bit, I'm not too worried. Perhaps a little, but not much. Carriers/service providers have been doing this sort of stuff for quite a while, and they're fairly experienced with it. Just a little while ago, AT&T did a $12 billion debt offering on fairly reasonable terms, and Deutsche Telekom did a fairly large offering as well, which went quite smoothly. Then there was Olivetti's buyout of Telecom Italia, which was in a league of its own. So we haven't yet reached the point where the carriers have to go begging in the streets for cash.
Rather, I think the main issue is the ability of the carriers to justify to themselves the costs related to the rollouts. I think the recent WAP backlash is making a number of them look at their options more carefully so that they make sure they're chosing the most economical upgrade path. Combine this with the fact that a lot of these companies are fairly conservative, bureaucratic institutions, and there could be some potential delays.
With that said, I do think that the costs related to 3G deployments can be economically justified for most carriers, and ironically, at first, it shouldn't be because of data, but voice. If W-CDMA lives up to its promises, it could provide something like 5-6x as much voice capacity when compared to existing GSM, TDMA, and PDC systems (based on the assumption that CDMAone systems have 3x as much capacity, and that W-CDMA would be at least twice that). This, in turn, combined with the economies of scale that naturally come when a service provider grows its operations, could allow carriers to cut their call charges by 40% or more, and still potentially have higher gross margins (obviously this drop wouldn't be in direct proportion to capacity increases due to SG&A, marketing, etc.). With this kept in mind, to a number of carriers, wireless data could just be looked at as nothing more than icing on the cake (of course, the icing could prove quite rich as well if streaming video, videoconferencing, and m-commerce take flight).
As for how I think Qualcomm will fare specifically, well, I suppose that this is better discussed on another board, given the number of "This is a Nokia board" complaints that come here, perhaps rightfully. I'll just say that I'm quite optimistic given the patent ruling and the spinoff.
Eric |
