Why Is Wall Street Slamming Wireless Companies?
Andrew Seybold's Commentary
23 January 2002
By Andrew M. Seybold
This is a wireless world we live in. More of us than ever before have wireless voice phones, not only in the U.S. but in the rest of the world as well. In Finland there are more wireless phones than wired phones, in December there were 30 billion Short Messages (SMS) sent and received in Europe, in Japan there are more than 28 million i-mode users, and in Korea there are more than 1.8 million 3G wireless data customers.
Yet during this past week, several large, prestigious, Wall Street firms have not only trashed all technology stocks, they have reacted to the slower fourth quarter growth of the wireless industry by saying some very negative things about the industry as a whole. As a result, Nasdaq took yet another dive and wireless companies, in particular, bore the brunt of the latest downturn.
It seems the wireless carriers "missing" their net add numbers this past quarter has spooked the Street. While the industry is investing in the future of wireless, the folks on the Street are being very shortsighted in their view of wireless. A single quarter of slow growth seems to them to mean that we are reaching saturation in the voice market. Add to this the fact that wireless data uptake is slower than they would like and what you have is a group of "industry analysts" declaring that the wireless sector is cooling off.
The Reality The reality is that the entire wireless industry is busy investing in tomorrow. Yes, it is important to add more customers each quarter, but the industry is preparing for the next wave of wirelessa wave in which both voice and data will play key roles. In Japan, NTT DoCoMo's i-mode service is generating about $25 per customer per month in additional revenue, yet in order to capitalize on this new income stream it had to spend a lot of time and money enabling its network for data services, getting content online and promoting the new services.
If I could do just one thing for the wireless industry it would be to put the Street to sleep for the next six to nine months. The wireless carriers would have the opportunity to invest in their future without having to worry about numbers for each of the next two or three quarters. No matter the technology, no matter the vision, the wireless industry needs to be able to invest in its future. These investments are huge. Sprint PCS has spent $700 million upgrading its system for cmda2000 1x capabilities, Verizon more than that and AT&T Wireless and Cingular are investing $billions in order to upgrade their networks to be able to offer both voice and data.
The payback on these investments won't come this year, and probably not next year either. However, many of the wireless operators will see a payback on their investment at some point in the future. If the Street continues to punish them because they miss their "net add" numbers for the next few quarters, investments will shrink and the new services that are designed to generate more revenue per customer will take longer to implement.
I, for one, don't believe that many of the wireless players will be able to satisfy the Street in the short term while working on providing additional services and capabilities in the long term. There must be a balance between what it costs to add a new voice customer today and what it will cost to prepare the networks for capabilities that go beyond wireless voice. The cost of network upgrades is high, but the cost of convincing existing users to buy new services is a fraction of the cost of acquiring a new voice user.
The Wireless Industry There are a number of exciting things going on within the industry. Voice-only systems are adding data capabilities, wireless local-area networks are popping up in airports and hotels, broadband services are coming online, the automobile industry has come to the realization that telematics-the marriage of vehicles, computers and wireless connectivityis a big deal for them, and soon we will be able to pinpoint a wireless device within a few feet, opening up a whole new set of marketing opportunities.
If the Street continues to diss the wireless sector so that stocks continue to decline, the result can only be a delay in these new services. It takes money to build out coverage, to make deals with information suppliers and to add data capabilities to existing voice-only networks. If wireless operators cannot raise the money they need because the Street is down on wireless, we may never get to see what the real opportunities are.
Those on the Street who can influence the stock prices of those in the wireless world don't understand what is needed. They don't understand how much has to be spent before we can start reaping the rewards of next-generation networks and services. As an industry, we need to make sure that they "get it"that they really understand that the next few years will require significant investments on the part of many of the wireless players. If they cannot make these investments, the promise of true mobility will not be realized.
We have become a mobile world. The future is bright. Having access to others almost no matter where we are or what we are doing will make our lives more productive and will permit us to intermix personal time with business time. Certainly there have been some miscalculations about what it will cost to enable us with mobile voice-and-data capabilities, and certainly some companies will not survive because they believed that things would move faster than they have. But on the whole, the wireless industry is alive and kicking. All we have to do is to blindfold and gag the "wireless analysts" on the Street and get back to the business at hand-enabling the networks and devices to provide an entirely new set of services that will pay for themselves many times over.
Do the wireless industry a favor. Call your broker and invest just a few dollars in a wireless stock this week. If enough of us do so, it will make a difference. It may even send a signal to the Street that wireless is alive and well.
----------
NEW RELEASE: The Outlook 4Mobility announces the release of Wireless Data Implementation Survey - What Does the Corporate World Think About Wireless Data? written by Sr. Partner Andrew Seybold. The repost provides the answers to your most pressing questions about the state of wireless data implementation in the corporate world. For information about ordering this new report visit our web site at www.outlook4mobility.com.
The Outlook 4Mobility provides its news summaries and analyses free of charge. Outlook 4Mobility products and services include Consulting Services, Mobiltorials, Newsletters, Customized Proprietary Research, Wireless Tutorials and Conferences. Please visit our web site at www.outlook4mobility.com for additional information.
2002 Outlook 4Mobility
Subscribe to Forbes/Andrew Seybold's Wireless Outlook newsletter.
Wireless Data University is a unique day-long tutorial done in conjunction with the CTIA. For six years, WDU has been providing, thousands of attendees with a basic foundation combined with sophisticated analysis about the wireless data industry. Sign up at ww2.expocard.com |
