Europe is in a state of both technical and financial confusion & disarray.
Just read this article - all the lies and half truths the EUROfools have been bombarded with have become their reality.. They just don't know what end is up. When this clears up NOK will be a candidate for tar and feathers.
JohnG
FOCUS Global Telecoms Shares to Stay Pressured Until UMTS Timetable Clearer
By AFX News Limited , Feb 27 2001
Global telecoms shares are expected to remain under pressure until the timetable for the
rollout of UMTS third-generation mobile phone services.
PARIS (AFX) - Global telecoms shares are expected to remain under pressure until the
timetable for the rollout of UMTS third-generation mobile phone services, analysts said.
They said brinkmanship between carriers and suppliers over the proportion each will bear of
the cost of UMTS roll-out is pushing estimates for launch dates and earnings coming on
stream further toward the horizon.
"Until the industry can talks time and date with one voice, the shares are going to waver," one
analyst commented.
"How can you take a bullish estimate from a handset-maker seriously when without the
operator commitment, the product will just be an address book with an aerial?"
Analysts said the stalemate was evident throughout last week's 3GSM telecoms conference
in Cannes, France, with operators claiming they are unwilling to launch until volume
production of handsets is assured and constructors' service availability is established.
Among operators, France Telecom's Orange said it will be ready to launch its GPRS service
in France and in the UK "within days", but that while it is maintaining its target of a
second-half 2002 launch for UMTS, it cannot confirm the date until handset availability is
clear.
Among constructors, Alcatel said some operators are delaying UMTS and EDGE orders by
6-12 months and that UMTS networks and services, which it last year expected to reach
volume sales by 2004-5, will only just begin roll-out by that time.
While Qualcomm Inc expects no substantial earnings before 2005, Nokia Corp today
announced it expects UMTS to be commercially viable by next year.
Analysts said much of the confusion over launch dates can be attributed to a dispute over
what level of subsidy the heavily indebted operators should apply to the new generation of
more sophisticated handsets.
"GPRS handsets will start off more expensive than the top-notch GSM terminals and will be
aimed at a business market until mass demand can bring the price down," one analyst
commented.
"But for UMTS to be a success, a mass market for non-voice services is needed from the
word go. Everybody was talking multimedia messaging last week and I think that's justified if
you look at the explosion in SMS, but the price of terminals could dissuade people from
upgrading," he added.
"Manufacturers have said the extra memory the terminals require must be costed in, but since
when has the pricing of terminals been that transparent? I think they are challenging the
operators to stick by their long-term earnings estimates and foot more of the bill."
Analyst Nigel Hawkins of Williams de Broe said earnings estimates are dragging down
shares: "There's an emerging reality that there is going to be no big bang, no explosion in
UMTS earnings. It's all been grossly over-hyped.
"The huge cost of licences in the UK and Germany for operators has only just begun to sink in
and now we have a whole raft of downgrades among constructors as they admit their
infrastructure and handset estimates were well off the mark.
"I foresee evolution, not revolution. UMTS and GPRS are going to cohabit for longer than was
expected; the big revenues will come, but slower than anyone would have dared say only a
short while ago.
"Alcatel admitted this last week. Data services may be the key to the big earnings everyone
wants to see, but this will pick up slowly; voice is still the driving force and the new technology
doesn't offer anything new there," Hawkins said.
Nokia's claims of UMTS viability by next year are "not really convincing" for Hawkins, who is
inclined to agree with Qualcomm's bearish view that substantial earnings from data services
are unlikely to materialize before early 2005.
"There will be a few appetisers on offer from late next year, but non-voice won't be dishing out
big portions for a long time yet."
Hawkins said talk of staff cuts among suppliers in their 3G operations is "not surprising" as
the lanch of services moves further towards the horizon. The "only sure winners" are those like
Vodafone which have the "deep pockets" and the scale to ride out what is going to be a "very
long game".
"Size really does matter. They have a massive subscriber base and exposure to all the
crucial markets. It's all about economies of scale. If you add to that the lowest debt levels
among the major operators, you can be sure that, long-term, Vodafone will be one of the
winners."
Hawkins said that for similar reasons, prospects are sound for Telefonica SA, which,
although it will operate UMTS in fewer markets, today announced a debt-to-equity ratio
"significantly below" the sector average, despite UMTS licence costs. The same is true for
France Telecom/Orange which, while heavily in debt, has a "good level of exposure in all the
right markets."
Hawkins said comments from Orange that it could seek a presence in Spain, Europe's fifth
biggest market, where it remains unrepresented, via a cross-border reciprocal virtual
operator network (VNO) agreement with a local player, showed "the right kind of strategy".
However, regulatory and technical difficulties are likely.
VNOs are "a second-best choice you can't actually get," he said.
Hawkins said the situation is different for Telia AB, which having failed to secure a Swedish
UMTS licence, has a VNO agreement with Tele2, as it is operating in its native market, where
it has no other means of participating in third-generation services.
Analysts said shares among constructors will continue to be pressured by the uncertainty over
UMTS launch dates. They said manufacturers are seeing their growth this year dragged down
by large inventories of handsets, particularly those using WAP technology, for which
aggressive subsidies on the part of operators are required.
Analysts said that constructors can expect to see unit sales further eroded. Consumers will
perceive limitations in WAP handsets. The faster transmission rates of GPRS and UMTS
services will make alternative devices for internet access, like handheld PDAs, attractive for
operators seeking products to subsidise and offer to the all-important business customers
likely to be the first to sign up for the new services.
Adrian Hopkinson at WestLB Panmure says one of the six UMTS licence holders in Germany
has indicated that 65 pct of around 1 mln devices it will order will be other than handsets.
While Hopkinson expects most of these devices to be sourced from the Far East, Psion PLC
said it expects "at least" 50 pct of its revenues to come from telecoms operators by the fourth
quarter of 2001 compared with 26 pct a year earlier.
Commenting on Nokia, Hopkinson said that while this does not affect the company's
short-term outlook, particularly in terms of infrastucture, the "threat to the dominance of the
traditional European players" means it and LM Ericsson AB must urgently launch the
enhanced WAP2 standard to challenge the assault of Far-Eastern device makers on the
global telephony market.
He said WestLB Panmure expects to have to lower its medium term profitability for Nokia's
handset business and that its 40 eur price target is under review.
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