Cingular Q4 May Mean Wireless Infrastructure Upside
01.24.05, 12:21 PM ET
Credit Suisse First Boston said that Cingular Wireless showed strong subscriber growth in the fourth quarter, with pro forma net additions of about 1.8 million compared with the research firm's estimate for 1 million. CSFB said that despite a strong handset sell-through, Cingular reported a sequential increase in handset inventory to $690 million from $474 million, "which we would estimate as an increase of one and a half to two weeks." The firm said that evidence of strong fourth-quarter sell-through "supports our view that there is potential upside to our global fourth-quarter unit estimate of 184 million units. However, the sequential increase in inventory levels implies a likely slow start to first-quarter handset shipments in the U.S., which implies limited upside to our expectations for a low double-digit sequential decline in global handset shipments." CSFB said it remains comfortable with expectations for a 14% sequential decline in unit shipments for Motorola (nyse: MOT - news - people ). "However, we would also note that the strong upgrade rate supports our view that handset unit demand in the U.S. continues to shift towards the high-end, where we believe Motorola is well positioned with the RAZR and other high-end products," the firm said. Citing Cingular's strong fourth-quarter capital expenditure and reiteration of "already strong" 2005 capital expenditure guidance, CSFB said there is "potential for modest revenue upside" for wireless infrastructure vendors such as Wireless Facilities (nasdaq: WFII - news - people ). Investment in new sites is an incremental positive for Andrew (nasdaq: ANDW - news - people ) and Powerwave Technologies (nasdaq: PWAV - news - people ), in addition to Wireless Facilities, CSFB said. "While we continue to expect strong wireless infrastructure spending in the U.S. in 2005, we believe Cingular's commentary about launching UMTS (universal mobile telecommunication system) with HSDPA (high-speed downlink packet access) supports our view that the 3G network buildout will be weighted towards the second half of 2005, which implies a more limited uptick in spending for Lucent Technologies (nyse: LU - news - people ), Andrew and Powerwave in thr first half. Cingular is a joint venture of SBC Communications (nyse: SBC - news - people ) and BellSouth (nyse: BLS - news - people ).
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