Telecom Monthly – November: Turkey Time Or Treat?

We declared October the “Spooky Season” not just because of the obvious tie-in with Halloween but also due to the economic meltdown.  Since then, the markets have made a minor recovery, but the roller coaster stock market, accelerating layoffs and lowered profit projections all indicate that November could be a real turkey.

The harsh realities of the present are inescapable.  The buildup of corporate debt and tighter credit markets are forcing wide scale cutbacks in nearly all industries.  And as employees are laid-off to cut corporate costs, their lost salaries will result in lower overall spending in the general economy in the months to come – a vicious cycle that the newly elected president will need to deal with.   The telecom industry is not immune.  While some small companies, focused on emerging technologies and services, are faring well, other over-leveraged stalwarts are teetering.  As sales and number of physical locations shrink for companies everywhere, this will eventually trickle down to the telecom industry, lowering total subscribed lines and services and taking profits with them.

But this is no time to panic; the temptation to run scared and make rash decisions may prevent you from spotting some tantalizing opportunities.  Now before you all run for the exits and jump off the nearest cliff, let’s consider the silver lining in this cloud of chaos.  Lots of customers and valuable assets currently reside with companies which are ripe for the picking.  A strong carrier, reseller, or manufacturer could easily enhance their market share in this troubled environment by picking up a competitor or expanding into related products and services.   If you’ve got cash in the bank, you are in a golden position to take your company to the next level.   And even if you are in survival mode, there may be partnerships and synergies available to you which wouldn’t have been possible in better times.

Take the banking industry as an example.  Stocks fell to record lows in a matter of days as well known names collapsed and were sold off for pennies on the dollar.  And while the rest of us trembled in our boots at the consequences, Wells Fargo, Citi, and others swooped in to buy up those cheap assets.  Sure it won’t help their bottom lines immediately, but as the markets recover, these companies stand to rebound higher than where they were when the meltdown began.  They are bigger than ever, having added customers and assets for next to nothing.

Where are your opportunities to pick up cheap assets?  Which of your competitors and vendors are on the rocks?  Let’s face it, no one is going to approach you and offer to sell you their assets for scrap – you’ve got to get out there and do the research and make the contacts on your own.  But out of this fire will come some exciting surprises.  This is a once in a life time opportunity to pick up cheap stocks, assets, employees, and customers.  A few years from now, those who made the right decisions today will be looking down on those who didn’t act at all.

And in the middle of all this insanity, there is still growth in the industry.  Google has launched their Android phone, the iPhone continues to grow at a record pace, high speed broadband services take an ever larger slice of the communications pie, and applications are increasingly a new revenue source for converged telecommunications systems and devices.  All is not lost for those who innovate.

Will November be a turkey or a treat?  That is up to you!

-iTodd