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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: StormRider who wrote (26743)	6/8/2001 11:37:33 AM
From: StormRider	Respond to of 37746

Telecom Services : In today's Stock Brief, Briefing.com argues that while everyone focusses on the semiconductor cycle, the bandwidth cycle is being ignored. This is not surprising given that with bandwidth having only recently emerged as the leading technology paradigm; we have yet to see what a cycle looks like. But our guess is that it looks a lot like what we're seeing right now. First , there was an exploding supply of bandwidth triggered by easy capital that financed a wave of telecom carrier start-ups. Now, those start-ups are either failing or cutting back dramatically to avoid failure. It's the bandwidth equivalent of semiconductor fabs being taken off line -- growth in supply is slowing, setting the stage for the next up-cycle. We see three key signs that point to an improving environment for incumbent telecom service providers that can survive the downturn. 1) The slowdown in supply growth just mentioned suggests that competitive pressures on incumbent carriers will abate, yet demand growth will most likely renew its strong growth trend after the current cyclical lull. Support for this argument was recently provided by AT&T's (T) decision to up basic residential rates after years of price wars. 2) The cost of upgrading telecom networks to improve efficiency is falling: Qwest (Q) has been one carrier that has dropped capex plans due largely to the fact that it can get the same gear for less; in short, it's a buyer's market for telecom equipment. 3) Incumbency and long-term viability have become a key competitive advantage: ask any CIO or CTO these days, and you will find that they are spending as much time looking at the financials of a potential carrier as they are looking at the service offering, be it colocation, internet service, or local phone -- businesses want to avoid the headaches of a service provider closing its doors. As we look at the telecom service sector, the key factor right now is viability -- emerging carriers with huge debt burdens and negative cash flow are too risky. The second key is the carrier's ability to build and maintain a cutting edge network capable of delivering broadband data services. Two companies that best meet the criteria are Qwest (Q) and Broadwing (BRW), with Global Crossing (GX) and Worldcom (WCOM) also looking attractive. Baby Bells such as SBC (SBC) and BellSouth (BLS) are less exciting candidates, but should also benefit from these trends. - Greg Jones, Briefing.com