Friday, January 09, 2009

 

Telecom investment in 2009

Despite the dire economic conditions, the year 2009 could be a banner year for telecom industry investment. Regarding just the wireless sector, I wrote in the current issue of Foxgroup Media Telecom Journal:
It has been encouraging to see recent announcements from new entrants and incumbents that there are substantial investments in wireless over the next 12 months; so much investment that it will tax the ability of Canadian workers to install all of the equipment.
Between Bell, TELUS and Videotron, more than 4000 cell sites will be built or enhanced this year.

In an interview with the Globe and Mail on Monday, TELUS CFO Bob McFarlane observed that while other sectors of the industry are lining up for government handouts,
This summer we had $4.3-billion extracted from the Canadian wireless industry to purchase spectrum due to a unique set of rules that, in my view, were counterproductive.
Of course, this "extraction" was actually a voluntary purchase of public assets, spectrum, by industry players.
Copyright MHG
Still, we need to think back to the original wave of 3G auctions. In the year 2000, immediately preceding the collapse of the technology industry, world governments raised about $145B in those spectrum auctions. The amount of money raised at auction equaled the sum of the annual revenues of the major equipment vendors. By June of 2000, Ericsson was already warning about the potential backlash. The chart at right is from a presentation I delivered in May 2001.

We need to consider the extent that capital investment in spectrum auctions impacts the ability of operators to build out their networks.

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