Jay, you are singing my tune. Since the vast spending on telecommunications of the late 1990s and until the bust of Y2K and 2001, I have seen the need for a vast market clearing, which doesn't happen in isolation for heavily indebted companies which have overbuilt assets, but spreads across the finest companies too, who have to meet the competition from the desolation of the bankrupted and newly debt-free competition who will sell on price to fill their systems.
Since May 1999 I had ranted about the imminent crunch coming. In October 1999 I attended Telecom99 and was in awe of the vast amount of money buying a petabit of the action. I likened it to a bunch of uranium going critical. That turned out to be a good analogy. Everyone wanted a piece of the action with little regard for the outcome of their competitive position against the mass of other money also wanting a piece of the cyberspace revolution. Which has not gone away, contrary to rumour. Neither has the telecom industry and neither will it. They are still the biggest thing on the planet right now, making all else trivial.
Not all telecom companies go down the gurgler. Those who own hot-stuff technology like CDMA and those who supply the shovels to the gold rush prospectors make a LOT of money. Those in the gold rush are usually disappointed, although rumours abound of fortunes made. There is a mini gold rush on right now, interestingly. Aztecs are thinking they can take part in a gold rush by buying the gold from the prospectors. Some are buying the prospectors' claims, since the effort of staking a claim and digging is a lot of hassle, not to mention hard work; unfortunately for them, at a gold rush price. Yes, I am saying this to taunt you Jay! Heh, heh!!
Most telecom companies are nearing their market clearing prices with assets going for a fraction of their replacement cost. Vesper for example, has been restructured with a large portion of the debt written off. Global Crossing is a bunch of assets on the block, valued at a small fraction of their contruction cost. Nortel, Lucent, JDS Uniphase and many others are getting close to their market clearing asset values.
QUALCOMM is separate from the problems because although they lost heaps in Globalstar, Vesper, and other dodgy investments, their primary business is supplying the shovels and shovels remain in great demand. People around the world continue to buy cellphones flat out - it's a global culture still gathering speed, despite the declines in some markets and the sad outlook for GSM sales compared with CDMA which is looming everywhere.
As you will have noticed with my reluctance to buy Global Crossing until it seemed to me to be really bust and at a desperation market clearing price of 4c on the dollar of debt, I was not convinced that trillions of telecosmic investments would all earn a good return. I was much more conservative than you! You rampant bubble buyer you!!
I have been advocating Wacky Wireless [aka Cat's Eyes pricing] for years [actually, since 1996, when I was discussing it in SI and with some senior QUALCOMM people, who were not convinced], versus the flat rate pricing ideas of not-yet-born Leap Wireless and versus the premium rate pricing of the not-yet-commercial Globalstar marketing ideas.
Given the current situation of Leap Wireless and Globalstar, I think I am going to be proven correct that my Cat's Eyes minute pricing theory is going to be proven correct - it's essentially a market clearing, whatever the market will bear, instantaneous pricing proposition, displayed on the handset.
There is certainly a LOT of fun taking place in the telecosmic markets, with white knuckles and drool as terror and greed hide and hunt in the financial world, while keeping a wary eye on Uncle Al. Hunter and hunted need to both keep an eye out for large predators - The Fed demands regular feeding with large amounts of raw meat.
The hunted, heavily indebted, telecosmic companies have to watch out for predators in all directions. The hunters have to not pounce too soon. Or too late. Especially if they plan to use borrowed money to go shopping for bargains in the telecosm.
Mqurice |
