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Verizon CapEx Cut Won't Hobble Vendors

Verizon's move to cut hundreds of millions of dollars from its 2003 capital projects budget won't hobble telecom equipment vendors, industry watchers say.

The regional voice and data carrier will cut infrastructure investment range in its flagging wireline unit from $7.3 billion to $7.8 billion to $6.8 billion to $7.3 billion.

Verizon hadn't allocated any of money, so no orders needed to be canceled, spokesman Peter Thonis told internetnews.com

Analysts in SG Cowen's telecom department agreed that the near-term impact for telecom equipment makers will be minimal, noting that Verizon's capital spending in the second half of the year should still be higher than the fist half.

The firm did not adjust estimates for Nortel or Lucent , who supply much of the equipment for legacy landline systems, because of Verizon's cut.

It also expects Verizon, and other carriers, to continue expanding consumer broadband and enterprise data systems, creating strong demand for Internet-protocol gear.

But that doesn't mean, SG Cowen is totally sanguine about the sector.

Even as carriers seem to be loosening their purse strings after two years of stingy spending, there is a broader concern that federal regulations of the industry could stunt growth.

"The confusing language of the (the Federal Communications Commission's triennial review order) and broad power given to the states created more questions than answers for carriers and could negatively impact their spending plans."

New York-based Verizon also laid partial blame on federal and state regulations for lower-than-expected results for its wireline business.

Other factors included the ongoing economic slump, which cut into business sales, and a move by consumers to drop landline phones in favor of mobile models.