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Current Topic: Telecom Industry

BCE Writing Off $5.7 Billion
Topic: Telecom Industry 6:41 am EDT, Jul 25, 2002

BCE, Canada's biggest telephone and media group, today announced write-downs of close to US$5.68 billion, yet another reflection of the costs of a big diversification drive in the late 1990's.

The biggest write-down was a charge for good will impairment related to the wholly owned Teleglobe, which recently filed for bankruptcy protection. BCE also took write-downs on its media and e-commerce units.

BCE needs to raise Cdn$5B to complete its purchase of Bell Canada. Its debt rating was recently downgraded, and shares are down 33% this year. BCE will sell its directories business to raise cash.

Analyst: "Local phone service is the big cash cow. ... The challenge going forward is to raise the money [to finance the Bell Canada purchase]."

If phone service is such a cash cow, why is it such a challenge to raise money? How can they possibly buy their way into high-speed Internet services, when they are about to pay Cdn$5B for a bunch of unprofitable voice customers?

BCE Writing Off $5.7 Billion

Telecom Crisis? Take 2 Aspirin and No One Will Call You in the Morning
Topic: Telecom Industry 6:34 am EDT, Jul 25, 2002

Congress and the Bush administration appear to be frozen in place when it comes to stabilizing telecommunications.

RBOCs battle their rival upstarts and press the government to eliminate restrictions on entry into the markets for long-distance voice and high-speed Internet service.

Long-distance carriers fight against sharing their networks with the locals at low costs.

The FCC remains intent on a slow deregulatory course.

Critic: "This is a disaster waiting to happen. [Deregulation] will ultimately blow up on them."

A VP at Verizon: "Washington has not yet concluded that there is a major problem in the telecom sector."

Washington sits idly by as the telecom industry collapses. Angry critics want to see some action.

Bah. How long can you postpone the inevitable, and to what end?

Telecom Crisis? Take 2 Aspirin and No One Will Call You in the Morning

Level 3 Makes Offer for Williams Comms.
Topic: Telecom Industry 6:57 am EDT, Jul 24, 2002

Level 3 has offered $1.1B for Williams Communications Group, the Wall Street Journal reported on Wednesday.

Here Comes Warren Buffett. (Look for a push to consolidate as a means of accelerating the inevitable collapse while localizing the damage as much as possible.) If we combine six debt-ridden companies into one, the mountain of debt will be so high as to be make bankruptcy unavoidable. And consolidating the carriers will eliminate competitive network build-outs, reducing the need to buy new telecom equipment. Excess equipment on hand is sold at cut-rate prices to pay off the bondholders. These factors lead to the collapse of suppliers. That's the idea, anyway.

It isn't going to get better until it gets as bad as it can possibly get. The sooner the telecom world collapses, the sooner it can be rebuilt. ("Can" is the operative word; it's not clear that anyone will be interested in doing so.)

Resistance is futile. You will be assimilated.

Level 3 Makes Offer for Williams Comms.

Corning Posts Loss on Weak Telecom Demand
Topic: Telecom Industry 6:52 am EDT, Jul 24, 2002

Corning, the world's largest maker of fiber-optic cable, posted a quarterly net loss of $370 million due to weak spending in the telecommunications sector (half of Corning's revenue), and said more cuts in its work force or facilities may be necessary.

"At first blush, it certainly doesn't look pretty. The company continues to lose money and the actual performance [as opposed to what?] in their core telecom business remains very weak."

[Sales will continue to slip, more cuts necessary, noncore assets must be sold. Profitability to be achieved in 2003 at any cost.]

So far this year, Corning's shares have fallen 64%.

Corning Posts Loss on Weak Telecom Demand

AT&T, Writing Down Cable Assets, Posts Big Loss
Topic: Telecom Industry 6:48 am EDT, Jul 24, 2002

AT&T announced quarterly financial results yesterday that it said modestly exceeded analysts' expectations, amid signs that the trends that have devastated parts of its business, if not getting better, are at least not growing worse.

Both AT&T's consumer and business-services operations are still shrinking because of continued weakness in the company's core long-distance telephone market.

CEO: "Given ongoing weakness in the economy and instability among some players in the telecommunications industry, I'm pleased with our second-quarter results. We continue to execute with purpose and integrity."

AT&T would have to assume the risk of trying to sell billions of dollars' worth of shares in Time Warner Cable at a time when the stock market generally, and cable stocks in particular, are taking heavy losses.

And AT&T would not have full flexibility in deciding when to try to mount such a sale.

(I don't suppose that retirees will have much luck trying to exchange their shares of "purpose and integrity" for vegetables at the grocery store.)

The fates of AT&T and AOL Time Warner are intertwined in the Time Warner Entertainment deal. It is going to cost both of them dearly to extricate themselves from the enterprise. Nobody wants to own a cable business these days; seems it's just not profitable.

But then, what is profitable these days?

AT&T, Writing Down Cable Assets, Posts Big Loss

Regional Bell Giants No Longer Invulnerable
Topic: Telecom Industry 6:40 am EDT, Jul 24, 2002

Shortly after BellSouth, the nation's No. 3 local phone company, sent its stock plunging yesterday by saying it would fail to meet its financial targets for 2002, one analyst released a report titled, "It's Official -- There Is No Place to Hide."

In some ways, the pronouncement was as startling as it was apt. While the carriers fought each other and CLECs withered, RBOCs could sit back with their near-monopolies and reap growth, profits and the adulation of investors.

Or so the story went.

The Bells' problems keep mounting.

Asked about growth prospects, a Verizon rep said, "We see long-term growth on the wireless side, and also a great opportunity to offer wireless services to our enterprise customers."

He made no mention of plain old telephone service.

Nothing about POTS, but also nothing about profits. Growth is not cheap in these markets, and the new customers remaining to be won are not particularly valuable.

BellSouth shares lost 18% yesterday on news that net income was down 67% for the quarter. That's a four year low. If you thought the RBOCs' cash flow immunized them against the telecom collapse, think again.

Regional Bell Giants No Longer Invulnerable

Lucent: More Losses, Another 7,000 Job Cuts
Topic: Telecom Industry 6:28 am EDT, Jul 24, 2002

Lucent announced a $7.91B loss for the fiscal third quarter and 7,000 more layoffs yesterday, adding another chapter to the seemingly unending tale of the telecommunications industry's woes.

Scott Cleland: "It's bad, and there's no cavalry coming."

Nortel believed its market had bottomed out and its fortunes would soon turn up. CEO Patricia Russo: "Like many others, we were wrong."

Shares of Lucent dropped by more than 21% on the news.

Lucent: More Losses, Another 7,000 Job Cuts

Fallout from Worldcom
Topic: Telecom Industry 6:02 am EDT, Jul 22, 2002

Jeff Kagan: "This isn't going to be a ripple on a pond. It's a tidal wave from a boulder."

Scott Cleland: "This is a case of lose-lose. It's like a virus that gets spread to everyone. Suppliers get shortchanged. People who do business with them get shortchanged. A lot of bad debt will get absorbed."

Meta Group: "This is going to be the big event that we're going to look back on and say 'That was the turning point.'"

The worst case scenario for the industry is a WorldCom that sheds its debts in bankruptcy, only to resume aggressive competition -- reducing long-distance rates further in an attempt to gain subscribers. "That would be a disaster."

Fallout from Worldcom

Bankruptcy at WorldCom Is the Largest in U.S. History
Topic: Telecom Industry 5:22 am EDT, Jul 22, 2002

WorldCom, plagued by the rapid erosion of its profits and an accounting scandal that created billions in illusory earnings, last night submitted the largest bankruptcy filing in United States history.

The bankruptcy is expected to shake an already wobbling telecommunications industry, but is unlikely to have an immediate impact on customers, including the 20 million users of its MCI long-distance service.

Shareholders, who owned what was once one of the world's most valuable companies, worth more than $100 billion at its peak, are expected to be virtually wiped out.

Largest. Bankruptcy. Ever. (At least for the next few months.)

Bankruptcy at WorldCom Is the Largest in U.S. History

Too many debts, too few calls | The Economist
Topic: Telecom Industry 3:39 pm EDT, Jul 20, 2002

The telecoms industry is in a mess. What went wrong, and how can it be fixed?

The dotcom crash was merely the warm-up. The telecoms crash is many times bigger. FCC chairman Michael Powell surprised nobody when he declared this week that the industry is facing "utter crisis". The situation is being likened to the Dark Ages.

Andrew Odlyzko, Warren Buffett, Bob Metcalfe, ...

The industry's hangover has two components: overcapacity and debt.

The bigger question is what will happen to America's struggling backbone operators.

The mobile industry faces the same challenge.

Once the smoke has cleared and the dust settled, expect the telecoms revival to come riding on the back of an unexpected technology that nobody in the industry has yet heard of.

Too many debts, too few calls | The Economist

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