Here's Wharton on telecommunications.
knowledge.wharton.upenn.edu
<The telecommunications business - from Lucent, AT&T and Nortel to the many recent start-ups Eis clearly in disarray. While investors in the late 1990s remained oblivious to signs of trouble, it is apparent now in hindsight that the telecommunications frenzy could not possibly have lasted, according to a panel of telecom experts at the second annual Wharton Finance Conference Oct. 12.
"Back in 1996, when the Internet was getting more popular, you couldn’t predict the bandwidth you would need," said Blair Levin, managing director at Legg Mason and former chief of staff at the Federal Communications Commission. "Some people thought it would be infinite and they tried to build it out that way. We didn’t accurately predict the demand, so now there is a lot of empty fiber pipe."
The result has been a number of bankruptcies and the likelihood that more will come. "There are a lot of troubled telecom companies that are just out of leverage," said Paul P. (Flip) Huffard, senior managing director in the restructuring and reorganization advisory group at The Blackstone Group. "Unfortunately, telecom has been a true growth area for the restructuring advisory during the last nine months or more." Or, as Levin put it: "It is much more pleasant being in telecommunications right now as a commentator than a participant."
Even those on the panel who are telecommunications participants were critical of their business over the last few years. There was too much free money, they said, and not enough foresight on how to use it. "You were penalized by the financial community if you didn’t grow your top line at 30% a year," said C. Thomas Foulders III, chairman and CEO of LCC International, Inc., a wireless design and management services company. "Now you have to be cash-flow positive or they will cut off your financial flow. It’s been crazy."...[contd]>
After Telecom99 I ranted about how it was like being at the centre of a nuclear explosion as it goes critical. There were trillions of dollars all looking for a piece of the action and millions of people all swirling around it like Moslems at the Haj.
The rewards to those who own technology or do well in design and marketing will be huge, [QUALCOMM, Leap, Globalstar] but the actual profits available will be competed away for the most part [hordes of handset makers and fibre owners] and the total money spent on telecommunications by end users might not increase much and certainly not enough to justify the money thrown at the industry. Shareholders dramatically overbid share prices and financed huge spectrum bids which are apparently too big.
QUALCOMM has done well because they own CDMA and Globalstar and a lot more besides. They have cash flooding in. Q! is a toll gate and supplier of the ASIC brains to make the technology work. It seems that investors have noticed so Q! share price is holding up as investors realize that cellphones sell, rain, snow, drought or war.
Meanwhile, China's economic growth rate for the latest quarter was 7% compared with the same quarter a year ago. That's not a recession. It's barely a slowdown. They love cellphones. They have built out a huge CDMA network incredibly quickly. They [China Unicom] are swinging their efforts behind their CDMA network rather than their GSM. They are bringing forwards CDMA expansion. China has replaced the USA as the engine of the world's economy - in telecommunications anyway.
2002 should be a LOT of fun in the CDMA world.
Meanwhile, in the middle east. That Carlyle Group - Bin Laden business deal was interesting. The bin Ladens and Bushes decided that given the political climate, it didn't look good.
I have to agree with them. Since Saudi Arabia is a Kingdom and being in the in-crowd is the way to get the money, the bin Ladens have done very well. I haven't read about the Carlyle Group agreements, but I suppose it involved getting the money in exchange for services too.
It has the icky sense of nepotism and family feuding going on. A carve-up in which the Bushes are donkey deep. They do say that the USA has the best politicians money can buy.
I wonder if Osama thought he wasn't getting his share of the cake, wants to take over Saudi Arabia and be the main actor in Islam, had spent a couple of decades in war in Afghanistan and that the USA being in Saudi Arabia and in cahoots with the Carlyle Group and his bin Laden relatives was queering the pitch.
I'm long enough in the tooth to know that things are usually not as simple as they seem and that there are undercurrents not visible on the surface. Europe used to be a shifting sands of ruling Kings, Knights and intermarrying, intrigue, murder and territorial conquest. The middle east is much like that now, with the powers that be jockeying for position and power, swapping allegiances and killing opposition.
I wonder if a major driving force for Osama's dislike of the USA is that the USA is tangled up in the midst of a family feud over who gets to own Saudi Arabia [to be renamed Biladinland or Osamaland depending on who wins the bin Laden / Binladin family feud]. Osama would obviously want to stop outsiders helping the opposition.
Well, the toughest, smartest and most ruthless gang wins. Those are the timeless rules of territorial conquest. Unless Osama can get a popular Islamic uprising in Saudi Arabia, he doesn't have a show.
I wonder if Globalstar sales are zooming in Saudi Arabia. They have a gateway. It seems that I'm in the midst of the family feud too. I wonder if the Carlyle Group owns the Globalstar gateway. Heck, maybe GlobalstarLP sold it to the Binladins and I'm in cahoots with them.
Life sure is a tangle in a globalized economy. I suppose it's possible that Osama and I share an interest in the Globalstar gateway or maybe a common shareholding in Globalstar itself. Good grief. I'd better check for white powder in the mail.
SurferM, it might be that not many of the big money interests want to see democracy in the middle east because that will dilute the cash flows and the mob will get their hands in the till. Democracy is fine for Kiwiland, USA and Britain, but maybe our cash flows would go bad if Saudi Arabia had mob rule as we do. What a tangled web we weave. I can see why Osama is anti-USA and anti-Kiwi though he probably hasn't noticed. When power and ownership are decided at the point of a gun instead of mutual agreement at the ballot box, or Supreme Court, that doesn't leave a lot of room for discussion.
Mqurice |
