Thursday, September 21, 2006

Calls of Note Part 1

- Jefferies & Co notes that over the past couple of days, they've been checking in with industry contacts for an update on Cingular's capex spending activity. Of course, Cingular is a major buyer of telecom equipment. The operator, this year, is expected to make up roughly 15% of overall capex spending and roughly 30% of wireless capex spending in North America.

Firm's industry checks indicate that Cingular is still rather slow in terms of spending activity. They recall that their checks in Q1 and Q2 indicated that Cingular's wireless spending levels in 1H'06 were softer-than-anticipated. Back then, contacts were suggesting that business within Cingular was slower-than- expected during the first half of the year. Many contacts " at that point -- had expected that Cingular would rebound in terms of spending activity during Q3. Looking back, that was wishful thinking. Now " most of the way through Q3 " they're hearing that the operator's business trends are still quite slow. Many contacts suggested that Q3 activity levels are slower-than-expected albeit not that different from 1H spending levels.

Cingular is deferring/slowing deployment of infrastructure on a number of specific projects
including deployment of new base stations and, in certain markets, the timing of UMTS market launches. Cingular is currently meeting with various consultants regarding significant operating and capital expense reductions planned for the business next year.

Vendors with meaningful exposure to Cingular include: Carrier Access (CACS), Sonus (SONS), Tekelec (TKLC), Tellabs (TLAB), Powerwave (PWAV), and Andrew (ANDW).

Notablecalls: To see how serious Cingular is about cutting costs just take a look at the InfoSpace (NASDAQ:INSP) news last night (scroll down). Add this to the Yahoo (NASDAQ:YHOO) warning. Canaries in a coal mine... Tough times ahead.

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