Q4

2008 Year in Review: Telecom nuclear winter, Take 2

Dan O'Shea — Tue, 23 Dec 2008 11:23:42 -0500

Snow is swirling around the FierceTelecom Chicago outpost as I write this. The dog is curled up in a ball to stave off a draft coming from... somewhere. The temperature is dropping. Visions of sugar plums, but also, unfortunately, of telecom nuclear winters, are dancing in my head.

Telecom economic metrics remained reasonably robust for most of the year while other industries were crashing. For the most part, company executives around the telecom world put on a happy face as the quarters progressed, though by the third quarter, many of them were put in the position of celebrating still-solid numbers, while being sure not to be too celebratory. Fourth quarter numbers, of course, will not become clear for a few weeks, but it did become clear early in Q4 that the industry's mood had changed.

While the industry debated whether or not TelcoTV services are recession-proof, telcos and their vendors began to cut back on most other fronts. AT&T announced major job cuts, as did Telecom Italia and BT, among others. Verizon Communications and Qwest Communications have taken their turn cutting back, and numerous vendors announced layoffs and other moves as capex forecasts dwindled. For most of 2008, the economy was a major story, because bad times weren't hitting the industry hard, but as the year closes, it's becoming a bigger story because the downturn has reached us. The snow drifts are piling up, and it's getting colder.

Of course, the "nuclear winter" is the part that comes after the big explosion, so to be clear: While 2008 got dicey near the end, we may have yet to experience the worst that the downturn will offer.

Bondholder suit ruling heaps burden on BCE deal

Thu, 22 May 2008 06:59:56 -0400

The private equity led buyout of BCE, owner of Bell Canada was dealt another blow as an appeals court in Quebec ruled the deal is unfair to BCE bondholders and should be blocked. In a case of exquisite timing, the court ruled on a lawsuit filed months ago by the bondholders just as BCE's prospective buyers--Ontario Teachers' Pension Plan, Madison Dearborn, Merrill Lynch Global Private Equity and Providence Equity--were trying to meet with banks to overcome the onerous credit terms presented to them. Those financial requirements were already casting some doubt on the deal, and this ruling, despite the buyers' intent to appeal to the Supreme Court of Canada, present an additional threat to the acquisition, which originally was valued at almost $52 billion.

For more:
- see this story at The Wall Street Journal

Related articles:
- The BCE deal already has been threatened by banks weary of the credit crisis. BCE report
- Bell Canada sale gets OK Bell Canada report
- Bell Canada's Q4 was flat Bell report

Credit crunch hangs up Bell Canada buyout

Tue, 20 May 2008 06:59:56 -0400

Bell Canada's hoped-for $51.8 billion buyout has been put on hold again while the banks in the deal look for better terms, wary of rising interest rates.

The Royal Bank of Scotland, Citigroup and Deutsche Bank led a group of banks that in June agreed to finance the takeover of Canada's largest telecom by a consortium including the Ontario Teachers' Pension Plan, Madison Dearborn, Merrill Lynch Global Private Equity and Providence Equity.

But a discordant credit market has caused the banks to look askance at the deal.

For more:
- See the story at The Times
- And, check out the New York Times article

Related art ices:
- Bell Canada sale gets OK Bell Canada report
- Bell Canada's Q4 was flat Bell report

Cbeyond revenue up 28%, but profit falls

Mon, 05 May 2008 06:59:56 -0400

Atlanta-based service provider Cbeyond reported an increase in first-quarter revenue of about 28 percent to $80.5 million, from $63 million a year ago. However, quarterly profit was down from $2.7 million in the first quarter of 2007 to $1 million in the same period this year.

Still, the company posted an increase in customer sign-ups, and re-affirmed its financial outlook for the rest of 2008. That re-affirmation comes after the carrier had lowered its 2008 revenue outlook following its fourth-quarter 2007 earnings report back in February.

For more:
- see this Associated Press report at Forbes

Related articles:
- Cbeyond profit was up in Q4, but the company's outlook was cautious Cbeyond report
- Microsoft teams with Cbeyond, New Global Telecom Microsoft report

Ovum: Telecom gear spending up 21% in Q4

Mon, 31 Mar 2008 07:59:54 -0400

Research firm Ovum said that industry-wide concerns about telecom equipment spending that surfaced during the final quarter of 2007 may have been overblown, and it has proof: Global wireline equipment spending actually increased by 21 percent during the fourth quarter of last year, and was up by 18 percent for the full year of 2007. Wireline service provider capex overall for 2007 reached $32.6 billion, about 15.1 percent higher than in 2006, Ovum said.

For more:
- read this post at Circuits Assembly

Related article:
- Some service providers and vendors have offered uncertain outlooks for 2008

Chunghwa Telecom Q4 profit slides

Fri, 28 Mar 2008 07:59:53 -0400

Taiwanese telco Chunghwa Telecom posted a slight decline in profit for the fourth quarter of 2007. Like other telcos in the world, the carrier is in the midst of a fiber broadband upgrade, and Internet and data services revenue were up for the quarter. Like other former monopoly telcos, Chunghwa Telecom continues to face criticism for how fair it has been to competitors and how quickly it has brought its own customers into the broadband age.

The telco, along with Verizon Communication and several other telcos, including recent additions AT&T and NTT, is part of the Trans-Pacific Express consortium building an undersea cable from the U.S. to Asia.

For more:
- read this story at VNUnet.com

Related articles:
- AT&T and NTT this week joined Chunghwa Telecom on the TPE team

ADVA posts Q4 loss, will cut 75 jobs

Wed, 19 Mar 2008 07:59:53 -0400

ADVA Optical reported a fourth-quarter net loss of about €27.7 million, or $43.5 million, and said a previously-announced corporate restructuring will include the elimination of about 75 jobs and the closing of two development offices. The Germany-based vendor is currently trying to change from a model in which the majority of its sales came through OEMs to one that is based more on direct sales.

For more:
- see this story at Light Reading

SureWest: Q4 loss, 2007 profit up on sale

Fri, 14 Mar 2008 07:59:57 -0400

Independent telco SureWest Communications reported a fourth quarter net loss of about $535,000, but posted a profit for the full year 2007 of close to $63 million. That gain came primarily from the $110 million sale of the company's directory business last year. SureWest also reported a $5.5 million write-down on its LMDS license investment. It continues to support LMDS customers, but does not plan to grow the business.

However, SureWest officials were fairly upbeat after what they said was a strong December. They said broadband revenue growth remains strong and that recent launches of an HD DVR service and VoIP service will continue to fuel broadband and triple play numbers.

For more:
- read this report at The Sacramento Bee

Related articles:
- SureWest just announced that it had launched HD DVR and VoIP services
- Are Telcos getting to a VoIP tipping point?

Sprint Nextel reports $29.5 billion loss

Thu, 28 Feb 2008 06:59:56 -0500

It was hard to find any silver lining in Sprint Nextel's fourth-quarter 2007 earnings report, though if there was one, it was the very faint glimmer of hope offered by a 75% increase in adjusted operating income to $194 million from the company's wireline unit. Still, wireline revenue was down about 1%.

The carrier reported a $29.5 billion loss, as CEO Dan Hesse acknowledged in so many words that things are in worse shape than he first thought when he came on board at the end of last year. Hesse also offered virtually no hope for a short-term rebound, and said the company would stop paying a dividend for now. The company is looking to write down its remaining $30.7 billion in goodwill value from its 2005 Nextel merger.

For more:
- check out this report at The Washington Post

Related article:
- Hesse departed Embarq in December to take the helm at Sprint Nextel

Charter VoIP subs up, DOCSIS 3.0 in sight

Thu, 28 Feb 2008 06:59:55 -0500

Cable TV company Charter Communications said in its fourth-quarter 2007 earnings report that it voice subscriber base had increased by more than 155,000 to surpass the 1 million customers milestone. The company also said it is aiming to test DOCSIS 3.0 during the second half of 2008. DOCSIS 3.0 chatter has been picking up of late, as cable TV companies look for a new edge against the telcos that have been increasingly successful encroaching on their turf.

Among other upward metrics, Charter saw its penetration of bundled services increase to 47%. Charter still posted a net loss for the quarter of $468 million, increased from a loss of $396 million for the same quarter in 2006.

For more:
- read this coverage at Light Reading's Cable Digital News

Related articles:
- Here's a bit more info about DOCSIS 3.0
- Verizon recently sued Charter over alleged VoIP patent infringement

Citizens to buy back $200 million in stock

Thu, 28 Feb 2008 06:59:53 -0500

Independent telco Citizens Communications is re-purchasing about $200 million in stock, the company announced after reporting fourth-quarter 2007 earnings this week. Citizens saw revenue climb about 14% during the quarter, boosted in part by the recent acquisition of Commonwealth Telephone, but overall earnings for the quarter declined about 8%.

Citizens CEO Maggie Wilderotter said the outlook for 2008 includes cash flow of between $450 million and $475 million.

For more:
- see this perspective at The Motley Fool

Related articles:
- Citizens said last month that it did not see a consumer market slowdown

Nortel to cut 2,100 jobs after big Q4 loss

Wed, 27 Feb 2008 06:59:54 -0500

Nortel Networks had been looking like a company in recovery for the last several months, but the Canadian vendor just reported an $844 million net loss for the fourth quarter of 2007, versus an $80 million loss for the same period in 2006. The company also said it is cutting about 2,100 jobs globally as part of further restructuring.

Revenue for the quarter came in at about $3.2 billion, close to analyst esitmates of $3.28 billion. The full-year 2007 loss for Nortel was $957 million. The company said it sees low-single-digit revenue growth for the rest of this year. During the second half of 2007, Nortel actually seemed to be primed to tackle an M&A strategy to put it back at the carrier table with the world's largest equipment vendors. It's unclear where such ambitions stand now.

For more:
- see this Associated Press report at BusinessWeek

Related article:
- Nortel's tough Q4 came after a pretty good Q3

Rogers sees profit jump, dislikes buckets

Mon, 25 Feb 2008 06:59:55 -0500

Canada's Rogers Communications saw its profit soar 44% during the fourth quarter of 2007, and as with so many other operators, wireless was a major driver in the strong finish. Net income came in at $254 million or about 40 cents per share. Wireless revenue alone increased about 17%. Meanwhile, Rogers Cable added 65,000 voice telephony customers during the quarter, and now has 656,000 total. Rogers officials also said they are not interested in being swept up by the bucket-plan ballyhoo taking hold of the wireless industry in the U.S. market. An analyst quoted in The Toronto Star noted that those bucket plans might make things difficult for carriers, as bandwidth consumption will become much harder to predict and control.

For more:
- see this coverage at The Toronto Star

Related article:
Flatrate revolution Article

Limelight improves, but issues low outlook

Wed, 20 Feb 2008 06:59:54 -0500

Content delivery network provider Limelight Networks posted fourth-quarter earnings that showed improvement in revenue and new customer additions, along with a narrowing of the company's net loss to eight cents per share from 25 cents per share for the fourth quarter of 2006. The company added 450 new customers during 2007 amid increasing competition from carriers like Level 3 Communications. But it actually issued a sales outlook for the first quarter that was lower than analysts estimates--$30 million to $32 million, against analyst views of $33.2 million.

For more:
- read this Associated Press report at CNN Money

Related articles:
- Level 3 last month filed a patent infringement lawsuit against Limelight

Qwest net income increases, revenue slides

Tue, 12 Feb 2008 06:59:57 -0500

Qwest Communications is continuing to show improvement, as the carrier reported a profit increase for the fourth quarter of 89% to $366 million, from $194 million in Q4 2006. The net income boost resulted in a doubling of earnings-per-share to 20 cents for the latest quarter. However, it wasn't revenue that drove the rise, but ongoing reductions in operational costs, plus a tax benefit. Revenue actually dropped 1.5% for the quarter to $3.44 billion, but operational expenses declined more than 6%.

Meanwhile, Qwest saw access line decline of 6.5%, which is a higher rate of loss than many other telcos showed for the quarter. Voice revenue slid 7.4%, and adding further fuel to speculation that broadband adoption is slowing industry-wide, Qwest gained 95,000 broadband customers during the quarter, about 70,000 less than it gained for the same period in 2006.

For more:
- read this Dow Jones Newswires story at CNN Money

Related articles:
- Qwest announced a $300 million FTTN plan with its third-quarter 2007 earnings

Is another telecom downturn coming?

Mon, 11 Feb 2008 06:59:58 -0500

Telecom service providers for the most part reported pretty solid fourth quarter earnings, while some equipment makers did well and others just managed to maintain positive numbers. The most common attribute across the board was that most telecom companies are tempering their outlooks for 2008. The upward trend of involuntary customer disconnects could have something to do with it, and more broadly housing market doldrums and ongoing recession fears may keep anyone from being too optimistic. Maybe the lingering effect of service provider and vendor consolidation also is keeping the waters muddy. Is this all forming the recipe for another downturn?

We want to know what you think. Take our brand new poll asking if the telecom industry is headed for another downturn. And, please post any more extensive comments you might have about the financial health of the industry, and the direction in which you think various industry health indicators are pointing.

- Dan

Rancor rises over diving DSL growth

Mon, 11 Feb 2008 06:59:53 -0500

AT&T and Verizon Communications, in their recent respective earnings reports, highlighted the expansion and customer growth on their new fiber-based broadband networks, but didn't say too much about the DSL-based broadband services. Analysts increasingly have been raising the notion the DSL growth across the board for telcos, and especially for the two largest telcos, came in well below expectations for the fourth quarter of 2007. Now begins a delicate dance as telcos may have to face declining DSL prospects while still look to establish solid footing as fiber-based operators of video-centric services.

For more:
- read this article at Telephony

Related articles:
- Verizon CEO Ivan Seidenberg has disputed the idea of DSL market seasonality

Alca-Lu quarterly loss improves, dividend cut

Fri, 08 Feb 2008 06:59:56 -0500

Alcatel-Lucent finally showed some improvement in financial metrics during the fourth quarter, posting a loss of $73 million, or 3 cents per share, that was much lower than the 36 cents-per-share loss in the fourth quarter of 2006. Sales for the quarter of $7.6 billion were also 18% higher than Q4 2006.

However, these results failed to meet analyst expectations, extending the firm's string of disappointing quarters. CEO Pat Russo said the company will suspend payment of its 2007 dividend as its recovery continues. The company also said its total loss for 2007 hit about $5.12 billion.

For more:
- see this report at TheStreet.com

Related articles:
- Alcatel-Lucent last fall announced 4000 job cuts and saw two execs leave

ALSO NOTED: Verizon to buy back shares; N.H. FairPoint hearings conclude; and much more...

Fri, 08 Feb 2008 06:59:51 -0500

> Verizon Communications' board approved a plan to re-purchase 100 million shares. Article

> New Hampshire regulators have ended hearings on FairPoint's proposed acquisition of Verizon lines. Article

> France's Neuf Cegetel reports 20% revenue growth in Q4, 16% for year. Article

Cisco numbers up, but outlook darkens

Thu, 07 Feb 2008 06:59:57 -0500

Cisco Systems posted earnings figures for its second fiscal quarter which showed slight growth in revenue, earnings-per-share and net income over the same period last year. But all attention fell on comments by Cisco CEO John Chambers suggesting a tempered outlook for the company and technology spending overall. Chambers put revenue growth expectations for the coming quarter at 10% to 12%, which is down from the company's long-term expectations of 12% to 17% growth.

Chambers acknowledged an unexpected dip in spending by European service providers during the previous quarter, but said the company feels "comfortable" about that sector. And, the financial services sector that Chambers said late last year was looking weaker after the mortgage and credit crises, actually finished the recent quarter stronger than expected.

For more:
- see this story in The New York Times
- check this story at Light Reading

Related articles:
- Cisco reported healthy service provider growth last fall