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Gartner: Telecom Markets Still Growing

While segments of the telecommunications industry were hit hard by the dotcom implosion, the worldwide telecommunications market is on pace to reach $1.4 trillion in revenue in 2001, according to new research by Gartner Dataquest.

If its prediction proves correct, Gartner said that would indicate an 8 percent increase in revenue over 2000. Additionally, Gartner projected the industry will grow to $1.5 trillion in revenue in 2002.

"Although several market sectors, particularly telecom equipment and infrastructure revenue, have been hit hard in recent months, the impact of the recession on the overall global telecom industry will be minimal," said Dean Eyers, group vice president and worldwide director of Gartner Dataquest's Telecommunications and Networking group.

The research lays much of the equipment sector's woes at the feet of the aggressive infrastructure build-out the operators pursued in 2000. That effort died away as the Internet bubble burst, largely contributing to a 4 percent decline in worldwide telecom equipment and infrastructure revenue in 2001. Gartner said revenue for those segments is expected to reach $364.7 billion in 2001, down from $381 billion in 2000.

But it's not all bad news, even for those segments. Gartner said that while it will take some time to take up the slack left by the build-out, underlying demand remains strong, which leads it to expect a return to growth over the next few years.

Meanwhile, Gartner's research suggests that the worldwide telecom services market may just be the shining gem in the industry's crown. Gartner said the segment is the least susceptible to economic uncertainty, and it is forecast to surpass $1 trillion in revenue in 2001, a 13 percent increase over 2000.

"The innate demand for basic voice capacity in developing markets and higher bandwidth in all markets will sustain a steady demand for telecom services," Eyers said. "It is much easier to delay a capital expense decision than it is to reduce reliance on a service which has become part of your business process or daily life."

Finally, Gartner predicts a slowing in the market for mobile handsets. But just because growth is slowing does not mean it will contract. Rather, Gartner forecast that growth will cool from "white-hot to just hot."

"Overall, the climate will be one of adjusting to an era of slower growth, but, nevertheless, growth," Eyers said. "The explosive increase across many sectors in 2000 was clearly unsustainable and we will not return to those conditions. At the same time, it would be foolish to believe that the entire market is at stake -- a number of sectors are still expanding today and others will bounce back over the next two to three years."

Gartner's research was released in the report, "Telecom Markets and the Recession: An Imperfect Storm."