dcsimg
RealTime IT News

Spectrum Auction May Boost Gear Makers' Future

Wireless network equipment makers may see a flurry of new orders in the next two years after a $19 billion government auction of wireless airwaves, analysts said.

The top two U.S. mobile services AT&T (NYSE: T) and Verizon Wireless were the biggest spenders in the auction.

While some analysts see the outcome as less of a boost than if a newcomer like Google (NASDAQ: GOOG) had won spectrum in the auction that ended this week, others say the auction may lead to spending of about $9 billion on network gear in coming years.

AT&T, which spent over $6 billion in the auction, and Verizon Wireless, which spent more than $9 billion, said they would use the airwaves to expand data services, which include everything from Web surfing to music downloads.

"It could provide some lift as these carriers expand their networks. The telling sign is whether we see meaningful capital spending committed now that the auction process is over," RBC analyst Mark Sue said.

The auctioned airwaves are being vacated by television broadcasters as they move to digital television services.

Neither AT&T nor Verizon has said on what technology they will base the networks that will use the new spectrum, but one analyst said they will likely use the airwaves for services they plan to build using high-speed mobile technology known as Long Term Evolution (LTE).

LTE is not expected to be ready for use in commercial networks until 2010 and beyond, making it hard to predict today how much the LTE equipment will cost, Pacific Crest Securities analyst Steve Clement said .

But based on typical network costs, Clement estimated that Verizon Wireless may spend about $5.7 billion on building a network around the new spectrum, and AT&T could spend about $3.5 billion.

[cob:Special_Report]"You'll have plenty of vendors trying to cash in on this. It will be competitive," said Clement, who watches telecommunications service providers rather than network gear makers.

Companies such as Ericsson, Alcatel-Lucent, Nortel Networks (NYSE: NT), Nokia Siemens and Motorola (NYSE: MOT), which already supply the U.S. wireless carriers, may be in a good position to win new business from their existing clients after the auction.

But new competitors such as Huawei and ZTE, which are seen as tough competitors in terms of pricing, could also stand a chance to win new business as a result of the deal.

"It could open the door for new competitors," said RBC's Sue who said that Verizon Wireless mostly uses Alcatel-Lucent, Nortel and some Motorola equipment today.

Ericsson, Alcatel-Lucent and Nokia Siemens supply AT&T with wireless network equipment.