BMO sees telecom sector growing strongly
Last Updated Thu, 14 Mar 2002 18:59:20
TORONTO - Despite the beatings that most telecom companies have taken recently to their bottom lines and stock prices, the industry is still poised to outgrow all other groups over the next five years, a Bank of Montreal economist said Thursday.
Tim O'Neil, the bank's chief economist, said production in the telecom industry will increase by more than 9 per cent a year over that time frame.
"It may seem counterintuitive that the communications and information services sector should be characterized as having high output growth given the well documented deterioration in its financial performance over the past year," O'Neill said.
"Nonetheless, we project that this sector's output growth performance will outpace that of the next fastest sector by more than 50 per cent through 2006," he added.
In a survey of 45 Canadian industry groups, the bank also said gains are expected in electronic equipment manufacturing, plastics, furniture, motor vehicle parts manufacturing, and the professional services sector between this year and 2006.
The bank's report noted that communications and information services output jumped by almost 13 per cent in 2001 under extremely difficult economic conditions, after growing by almost 18 per cent during the previous two years.
Despite the excess capacity that its putting downward pressure on profitability in the communications sector this year, BMO said it sees opportunities for firms in the sector to further penetrate business and household markets with existing services.
"We also believe that existing capacity and rapidly developing technologies provide the opportunity for communications companies to offer new value-added, bandwidth-intensive offerings, such as video-on-demand and higher quality teleconferencing," O'Neil said.
The expansion in the electronics manufacturing sector most likely won't get underway until next year. The bank sees the group continuing to cut output by about 17 per cent this year before a significant "snapback" begins.
In the professional and technical services sector, growth is expected to average 6.6 per cent for the period 2003 to 2006.
"The key driver for this sector will be the continued trend to outsourcing professional and technical services as firms increasingly focus on managing their core businesses," O'Neill said.
Written by CBC News Online staff |
