The source of the humble investor’s pain and suffering for the last four quarters or so has been no secret: Capital spending by service providers in virtually all areas has taken a huge hit in 2009, and we are expected to struggle next year as well, as you can see in the table below.
Table 1: Worldwide Telecom Capex
|Source: Company reports|
While we’re still talking fairly big numbers here (an estimated $250 billion in 2009), that comes on the heels of three years that averaged growth in the low double-digits. Obviously, wireless growth has exceeded that of wireline, and, depending upon your calculations, wireless nudged over the 50 percent mark for the first time in 2008 and continues above that threshold into 2010.
Another major shift that has taken place is that the Asia/Pacific region has exploded from less than one-third of wireless spending in 2005 to more than half of wireless spending this year. Particularly from 2008 to 2010, a major portion of that spending derives from the 3G rollout talking place in China.
The simple fact of the matter is that if your company is not selling wireless infrastructure equipment into one of the service providers in China – preferably China Mobile Ltd. (NYSE: CHL) – the last couple of years, business probably hasn’t been great. Since the bulk of the capital spending at China Mobile/Telecom/Unicom is being directed to the “home team” – i.e., Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) – it doesn’t leave many scraps on the table for the remainder of the pack to fight over.
So recently, wireless infrastructure in China has been the only game in town, so to speak. Or has it?
— Bob Faulkner, Special to Unstrung. Alvarion is one of the many technology and telecom companies that Bob Faulkner writes about weekly in The Telecom Connection.
Next Page: Going Global