Two years of difficult trading conditions has resulted in every major telecommunications supplier co...
Two years of difficult trading conditions has resulted in every major telecommunications supplier company reducing capital expenditure, according to SchroderSalomonSmithBarney (SSSB).
Robert Mocatta, analyst at SSSB, said that projected capex cuts are above 10% for most large telcos but the companies have not changed their revenue or operating cashflow forecasts to match.
The result, he said, is that the projected apparent cash generation each company is expecting has increased. Mocatta said: 'We are concerned that either revenue or margin expectations may be too high as a result. Our favoured investments are the companies that are cutting costs, reducing the capital base and not investing heavily.'
Mocatta said the wave of acquisitions over the past two years has begun to unwind. He added that that process was reversed in the fourth quarter of 2001 with Telecom Italia deconsolidating Telecom Argentina and BT spinning off its mobile business.
Revenue growth is slowing in the mobile arena with a 2% rise in the quarterly rate in the fourth quarter. This has led SSSB to prefer restructuring plays .
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