U.S. Bancorp Piper Jaffray Suggests That 'Dramatic Decrease' In Telecommunications Capital Spending is a Myth
Analyst Uncovers Spending Shift in Telecommunications Capital Spending in A Proprietary Research Study
MINNEAPOLIS, March 6 /PRNewswire/ -- U.S. Bancorp Piper Jaffray Senior Communications and Computing Analyst Ted
Jackson, today released data from a proprietary research survey regarding the shortfall in telecommunication service providers
budgeting plans for fiscal 2001, compared with those of fiscal 2000. Jackson contacted 33 pure-play wireless and 62 wire-line
carriers, for a grand total of 95 carriers worldwide. The total sample size included 83 respondents with the split between
wireless and wire-line carriers being 30 and 53, respectively.
``In our survey, we found that worldwide wireless spending is expected to constitute approximately 27 percent of total
telecommunications spending in fiscal 2001, a 26 percent increase over fiscal 2000,'' said Jackson. ``We expect a shift in
spending from fixed telephony to wireless communications due to 2.5 and 3G wireless network build-out plans in the United
States and Europe in particular.
``In our view, wire-line capital spending in fiscal 2001 is not expected to decrease as 'dramatically' as previously anticipated for
two primary reasons:
1. Next-generation service providers are expected to scramble to initiate
services in major markets to gain a critical mass of customers, thus
shifting from mere network deployment phases to service delivery
initiatives;
2. Traditional services providers with predominant legacy technologies
are expected to take further steps aimed at consolidating their
networks and further deploying packet-based solutions amid cost saving
and competitive pressures.
``In aggregate, we expect wireline capital expenditures to marginally decrease to $136 billion from $137.1 billion. These
numbers mask a shift in expenditures, however, as we see solid growth in markets outside of North America, and a pronounced
decline in expenditures from third tier carriers.''
In his report, Jackson discusses the challenges and opportunities facing companies within his coverage area, relative to new
strategies adopted by communication services providers as a result of current capital markets and the general macro-economic
environment. ``We believe the increased worldwide wireless spending and UMTS (spell out) rollout plans bode very well for
Openwave Systems (#@) and Comverse Technology (#),'' added Jackson.
Openwave recently announced that it was selected by AT&T Wireless to provide the carrier's platform for its 3G launch and
introduction of I-mode service and that it would provide BT Cellnet Ltd. platforms for its Unified Messaging. ``We believe
recent add-ons from tier-one carriers such as KDDI, BT and AT&T suggest that Openwave is helping carriers bolster average
revenue per user,'' said Jackson. ``We expect Openwave to land similar contracts over the next 12 to 18 months as additional
carriers undertake to upgrade their infrastructure in order to support xHTML and 3G services.
``In addition, we believe Comverse Technology has secured itself as a prominent benefactor of service providers' increasing
needs for enhanced network-based services, including messaging solutions and wireless applications. With a customer base of
more than 250 wireless carriers, we believe the company is well positioned to capture high profile contracts falling out of the
3G deal.''
Jackson also discusses the effects of the telecom capital spending on Sonus Networks (#). ``We believe that Sonus Networks
is poised to greatly benefit from the new trends shaping the telecom industry. Carriers have rushed to implement massive
international undersea fiber ventures, supported worldwide satellite deployments and developed high-speed local networks,
while connecting the far-reaching corners of the world. We believe carriers will continue to strive to position themselves as
one-stop shops for communications services and will strive to broaden their portfolio of offerings to include a range of services
including voice over Internet protocol, ATM, Frame relay, Voice VPN and Web hosting/data services. As carriers try to expand
their footprints in new markets, they will need to bring new products to market more quickly and cost effectively.''
U.S. Bancorp Piper Jaffray, a subsidiary of Minneapolis-based U.S. Bancorp (NYSE: USB - news), provides a full range of
investment products and services to businesses, institutions and individuals. The company's investment banking business has
grown exponentially in the last several years by focusing on the needs of growth companies in the health care, technology,
financial institutions, consumer and industrial growth sectors. U.S. Bancorp Piper Jaffray has a national reputation for its
expertise in fundamental research and equity and debt financing. U.S. Bancorp offers a comprehensive range of financial
solutions through U.S. Bank, First American Asset Management, U.S. Bancorp Investments and its Libra Division and U.S.
Bancorp Piper Jaffray. Securities products and services offered through U.S. Bancorp Piper Jaffray, Inc., member SIPC and
NYSE, Inc., a subsidiary of U.S. Bancorp.
Some or all of the following hedges may pertain: (#)U.S. Bancorp Piper Jaffray Inc. makes a market in the company's
securities. (~)A U.S. Bancorp Piper Jaffray Inc. officer, director, or other employee is a director and/or officer of the company.
(@)Within the past three years, U.S. Bancorp Piper Jaffray Inc. was managing underwriter of an offering of, or dealer
manager of a tender offer for, the company's securities or securities of an affiliate. Additional information is available upon
request.
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