Mobile telecoms industry down, but definitely not out

The week prior to Mobile World Congress is frantic for any mobile telecoms journalist. Requests to interview executives or see the latest demonstration arrive on a minute-by-minute basis--and this year has been no different.

These invites come from the complete spectrum of those companies attending MWC, from the very large to the very small--all claiming to have something that is vitally important to reveal or demonstrate. It's a hopeless task for even the most conscientious journalist to adequately cover anything other than a very small percentage of exhibitors.

This year's task to cover the more important and relevant announcements has been made more difficult by the overwhelming plethora of new products, services and applications that will be unveiled this week.

This level of activity has made me question if the global economic downturn has impacted the mobile telecoms industry, or is this frenzied level of activity little more than a disguise?

Undoubtedly there is turmoil among infrastructure and handset vendors, and the last few months have been particularly bleak for some. But are these times really as dire as many pundits are forecasting, or--risking what little reputation I have for making predictions--not quite so disastrous?

According to Ovum, the severe downturn in Q4/08 profits registered by the infrastructure industry largely stemmed from large asset/goodwill write-offs and/or impairment charges taken by several vendors, including Motorola, Alcatel-Lucent and Tellabs. The situation was not helped by the end-of-year appreciation in the US dollar against other major currencies.

While 2008 will want to be quickly forgotten by industry executives, the typical telecoms vendor balance sheet, on average, is also now relatively clean, with only a slight increase in overall debt, and with some companies actually reducing their net debt. Ovum believes that another good sign--and one that hints at improved sustainability--is that cash plus liquid assets relative to monthly Opex increased slightly in 4Q/08.

But, what will be watched intently this week in Barcelona is what the Chinese infrastructure vendors will be saying and how they are positioning themselves to take advantage of other vendors' difficulties. The two larger manufacturers, Huawei and ZTE, have both made enormous progress in capturing market share over the last few years and remain optimistic based on last year's order flow. Whilst these vendors are tightening their belts, it seems likely they will benefit from the plight of other telecoms manufacturers and become the global giants they so want to be. -Paul

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