Hi, elmat - The first posts I read alerting us to this potential problem were by Bernard Levy, and those posts preceded any article by any journo on the subject. My recollection was that everybody was still entranced by the 3G dream, then: last fall.
Slowly, over the next few months, I got the impression that some people started to look at the big picture, and they didn't like what they saw: spectrum auctions had caused a level of debt greater than that which had caused financial crises in the past, in Europe. More of that debt came from one sector (ie., telecomms) than ever before.
Working back from that, the next fact: in order to build the infrastructure required, what was needed? More debt.
Given the overweighting of telecomms in Euro debt, capital markets are unlikely to give the sector more money, except at a significant premium, and every increase in the premium makes the financial success of the enterprise less likely.
The next source would have been the infrastructure suppliers: Nortel, Ericsson, etc. These companies can finance some, but not all the infrastructure needed. They need to be careful: an expensive mistake can put them in jeopardy.
And nobody, yet, has produced anything like a "killer app" that would cause the public to migrate: the best has been messaging, and there is reason to believe that 2.5G can accomodate all that is needed.
The telcos have given no reliable figures for infrastructure costs, and I have been unable to find anything better than guesses - and those guesses seem to be based on limited buildouts (high-density areas, not universal).
The recent report by Forrester suggests, yes, you are right: UMTS will be built. But what will happen?
1 - Limited buildouts
2 - Difficulty in finding revenue models that will pay off debt.
3 - Failure and consolidation among the players.
4 - Earnings that will drop into negative territory around 2002-2003, and will not turn positive until 2007.
When you say, "Fixed Line operators, the France Telecom's and British Telecom's of this world want to replenish they coffers with inflated flotation of mobile assets. And they want to do so to keep throwing a life line to their fixed line operations." I agree. The telcos are making desperate efforts to migrate from voice to data.
I think that they, and the governments that filled their coffers at spectrum auctions, have made a crippling mistake: they have depleted, or will deplete capital markets. They still need more money to build.
What is the basis for that thinking? Is it based on jockeying for position among various players, or the lack of a "killer app", or interest rates, or long-term strategies?
No. It is based on levels of debt that exceed historical European highs, now.
JMO,
Jim |
