What I want to know is the following. What will the state of the telecom sector be in after what we have now is finally priced in?
The telecom sector is going to be vastly more ILEC-centric within 3 years. The pace of the buildout will be slowed in order to allow for EBITDA considerations, in lieu of the nonsense last year about "build it or die:. The sector will be a lot more boring. Think about the huge success of the Erie Canal in 1808 leading to huge capital flows into the canal sector the following year. By 1810, the bubble had burst. The great majority of canal companies that were invested in never turned a shovel of dirt. By 1814, the bankruptcies had ended, the few canal companies in business, after consolidation were largely successful. Until the next opportunity for a speculative bubble came along. The railroad. To me, the parallels are nearly complete. What replaces the Internet as the next great hope in telecom? Your guess is as good as mine. It cannot be wireless. The laws of physics rules that out. What can replace the current generation of switching and routing gear? That is the crux in the optical age. That is where the bottleneck occurs. Many a press release will come along, touting the "all optical switch". This is the Holy Grail today. Beware of prophets bearing false promises of great advances. There will be hundreds of them. The truth will only be apparent to the crowd after the "device" is no longer going to yield profits in the public markets. Seek information about Raza Foundries and you will see why.... or maybe not. And then we can share my view of the public equity market being a mere "exit strategy" and dumping ground for the smart crowd in the next decade.
Also, what should be done so the telecom sector makes more sense down the road?
Again, I'd advise about 1,000 hours of reading, Greg. That ought to help to make it make sense. (I know what you meant, and I'm just being a little flip here, just a joke, eh?)
The mess the telecom sector is in was destine to happen and was only exasperated because of the Internet and New Economy hype.
I'm not as fatalistic as you. I believe we had to work really hard to create this mess. It certainly wasn't destiny.
Ciao! |
