RealTime IT News

S&P: Sluggish Year for Telecoms

If you think 2003 will be a bounce-back year for telco players, think again. A new report from a Standard & Poor's telecommunications equity analyst about the wireline telecommunications sector calls for access lines to decline by 4 percent industrywide this year.

Todd Rosenbluth of S&P said pricing pressure on wireline telecom firms will likely continue due to increased competition as they cross into each others' territories.

As a result, he expects to see sluggish revenues for major carriers in 2003.

"AT&T is moving into the local phone service market, and there is even more competition in long distance as SBC and Verizon complete their approvals to offer long distance service," he said.

Cable players are pressuring carriers' revenues in the broadband, or high-speed data services arena. And cable companies are increasingly moving to offer voice, or telephony services, that threaten the carriers' bread and butter revenues as well, he said.

The twice-yearly survey pointed to a recent ruling by the FCC, parts of which require that Baby Bells continue to share some of their local phone lines with competitors, as another factor that will dampen growth prospects this year.

"Standard & Poor's anticipates there will be industrywide access line declines of at least 4 percent, as cable and wireless offerings further penetrate U.S. households" and staff cuts at many companies reduce their need for wirelines.

"These firms will need to look outside their traditional voice services for growth," Rosenbluth said, and at the same bundling strategy that cable companies are pursuing. "They need to focus on data and bundle it with wireless services. Voice is turning into more of a commodity. In order to grow you've got to combine different packages."

Local phone provider Verizon is starting to do that, he noted, such as combining local, long distance and even DSL for a fixed rate with its "Veriations" offering, Rosenbluth said.