Telcos, Chipmakers Split on Economic State

Mobile phone operators appeared unworried by the specter of a recession in the world economy at the wireless industry’s leading trade show this week, even as some hardware makers signaled concern.

From Australia’s leading operator, Telstra, to FranceTelecom’s mobile business Orange, carriers said phones remained a high priority for consumers, helping to shield telecom companies from a slowdown.

At the Mobile World Congress in Barcelona, Telstra CEO Sol Trujillo told Reuters, “The one thing you always will want to do is to be in touch, talk to your family, communicate.”

Expanded services beyond simple voice calls and text messages offer further upside, he said.

“The services we are providing now are still of high value. Even though the economy may be bad, would you still share photos with your mother, father, brother and sister? Would you send them by [Multimedia Message Service]? My bet is that you still will,” he said.

Multimedia Message Service, or MMS , is a method of sending text messages with attached pictures or video.

While telecom operators’ revenue may hold up, their capital spending may not.

China’s Huawei Technologies said it had seen operators becoming nervous about a possible slowdown, which could lead to slower rollouts of new, advanced mobile telecom networks.

“They’re nervous, but we have not seen them pull back capital expenditure,” Ronald Raffensperger, head of core network marketing at Huawei, told Reuters.

[cob:Related_Articles]Cisco Systems CEO John Chambers last week sent shares tumbling by saying U.S. and European companies were the most cautious he had seen in years, resulting in a slowdown in network equipment demand.

But Chambers said at a news conference in Barcelona this week that the slowdown appeared to be short-lived.

“I hope to be here in three months saying I was wrong and it wasn’t much,” he said. Chambers is typically among the most upbeat technology executives on the global economy.

Chipmaker Infineon said it could not predict how weak its mobile business will turn out to be this quarter and therefore could not promise the unit would be profitable for the fiscal year to the end of September.

Greg Delagi, the head of Texas Instruments’ wireless chip business, was more optimistic.

“There are some clouds on the horizon — it doesn’t affect what we’re doing,” he said. “If there’s a downturn in the economy, we’ll weather it.”

Executives from both Nortel Networks and Nokia Siemens Networks said they had not seen evidence that network equipment clients were feeling effects of an economic slowdown.

“Basic demand for operators is pretty good, and if it’s good for operators, it’s good for us,” NSN CEO Simon Beresford-Wylie said. Operators may even benefit in some ways.

Hamid Akhavan, the head of T-Mobile International, owned by Deutsche Telekom, said the company had yet to see effects from the global credit crisis. “To date we haven’t seen a spike in bad debt or seen significant drop in usage.”

The chief executive of Turkey’s leading phone company Turkcell, Süreyya Ciliv, said the firm was outbid on acquisitions in the past but tightening credit markets meant it now faced less competition from private equity funds.

“I am optimistic that we can make good acquisitions at good value,” Ciliv said.

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