Telecom spending 2009 - major cuts not evident

Both publications and research companies are jumping on a story that telecom is headed for a major slump, but we believe they are all seeing too many shadows at least for the present.

In our research, we have not found any concrete spending cuts from telcos, nor any major concerns that a recession of even a year’s length would create one. Telcos, like other industries, are worried about the possibility of a major systemic collapse in banking, credit, etc., but as that risk recedes, we believe they will then move to execute on their previous plans for 2009, which involved wireline capex increases from 0 to 4 percent and wireless from 2 to 8 percent.

In the meantime, they are pushing spending out. That means that if clarity in the recovery can be achieved by late spring, two-thirds or more of the 2009 plan could still be captured. If recovery is still not convincing by late summer, we believe that spending will indeed be down by perhaps 3 percent in wireline and perhaps flat in wireless.