This timeline seems insanely optimistic.....
investorshub.com
US Mobile Capital Spending "Cingular 3G Decision
07:36am GMT 13-Sep-04 UBS (Europe) (Schlesinger, Jeffrey) No Symbols
UBS 13 September 2004
* Cingular expected to move forward with deployment of WCDMA:
We believe that US mobile operator Cingular will move forward wtih a
nationwide deployment of WCDMA technology including HSDPA in late 2004 or
early 2005. We believe Cingular is aiming to turn-on services in six cities,
including Atlanta, Chicago, and Houston, by early 2005.
* Vendor selection is expected to be eminent:
We believe Cingular's vendor selection decision is expected eminently, with
contracts for this WCDMA network likely valued at ~$2bn+ to be split across
2 to 3 vendors. Ability to deliver HSDPA technology, financial incentives,
convergence elements (softswitch), and US-based manufacturing likely to
impact vendor selection.
* Lucent, Ericsson, Nokia, Nortel seen as best positioned:
We believe that Lucent is likely to win a portion of the contract given that
the vendor is US based and is trialing in Atlanta, one of the cities
targeted for deployment in early 2005. Ericsson, Nokia, and Nortel likely
battling it out for one to two remaining awards.
* Cingular 3G deployment seen as a positive for the sector:
We believe that a WCDMA deployment by Cingular in 2005 would likely boost
investor sentiment in the sector heading into 2005 as this event alone could
boost US wireless capital spending by 5% in 2005, everything else being
equal. Decision by Nextel to go ahead with a 3G network deployment would
boost sentiment and capex further.
Decision on Cingular 3G RFP Expected Shortly
We believe that a decision is eminent by US mobile operator Cingular on the
contract awards for its pending RFP ("Requests for Proposal") for the build
out of a nationwide 3G WCDMA network in the US. We believe that the RFP could
be valued at approximately US$2bn.
The build out of this network is expected to take place over a two-year period
in 2005 and 2006. We believe a decision on the RFP is eminent with a public
announcement possible by year-end. Checks with industry sources suggest that
Cingular plans to turn on six markets by early 2005, three of which we believe
will be Atlanta, Chicago, and Houston. In turn, we expect an aggressive build
out in some markets to commence in late 2004 or early 2005.
HSDPA and IMS Key Technology Elements
We believe that HSDPA (High Speed Downlink Packet Access) technology is a key
requirement in the RFP as is US-based manufacturing of equipment. With HSDPA
technology, Cingular is looking to match the data functionality of EVDO
deployments by both Verizon and Sprint. Most major mobile infrastructure
vendors have announced their intention to have HSDPA technology available by
the end of 2005. In addition, we believe that the RFP includes convergence
elements like Softswitch.
We believe Cingular also recently issued an RFP for a next-generation services
platform based on an IMS core (i.e. IP Multimedia Subsystem). We believe these
two RFPs are likely related as the evolution to WCDMA will require an IMS
core.
Lucent, Ericsson, Nokia & Nortel Seen as Best Positioned
We believe Cingular is most likely to select two or three vendors for this
project, with only a very remote chance that four vendors would be chosen.
While it is difficult for us to predict the winning vendors at this time given
the fluidness of the bidding situation, we believe that the main contenders
are Lucent, Nokia, Ericsson, Nortel and Siemens. We believe Lucent is likely
to get a portion of the contract given their trial in Atlanta, which is one of
the markets scheduled to launch in early 2005. We also note that Lucent is a
US company and has an aggressive development for HSDPA technology. In
addition, we believe Ericsson, Nokia and Nortel are well positioned to capture
pieces of the award given that these vendors supplied the majority of
Cingular's and AT&T's GSM overlay network. While Siemens also participated in
the GSM overlay network at Cingular, this was to a smaller degree relative to
the other vendors. We would handicap Siemens has least likely of the vendors
mentioned above to capture a piece of this contract.
Given the significant WCDMA opportunity presented by this RFP vendor pricing
is likely to be aggressive. In addition, we would not be surprised to see
financial incentives (i.e. vendor-financing, credits, etc.) and/or handset
bundling, as part of the bids being submitted by vendors.
A Positive for the Sector
We would view a decision by Cingular's to deploy a 3G WCDMA network as a
positive for the sector in terms of sentiment going into 2005 as Street
expectations are for little if any growth in US wireless capital spending in
2005. In addition, we believe sentiment could be boosted further if Nextel in
the US also announces plans to deploy a 3G network in 2005, which we believe
is possible given public statements by the operator.
We note that total US capital spending in 2004 is expected to be approximately
US$20.3bn (roughly a quarter of global wireless capital spending), with
Cingular and AT&T Wireless expected to comprise roughly US$5.6bn of the US
total. Assuming flat spending in 2005 for existing networks, an incremental
US$1bn from Cingular's 3G WCDMA network deployment (i.e. assuming the
estimated US$2bn contract gets split 50/50 in 2005 and 2006) would alone
represent approximately 5% growth in US mobile capital spending. If Nextel,
which has estimated that it too would likely spend US$2+bn to build a 3G
network, were to spend another US$1b for its 3G network, US mobile capital
spending in 2005 could be up 10% versus 2004, everything else being equal. |
