Growth expected this year in 'virtually all telecom sectors'

The telecommunications equipment industry saw its biggest sequential increase in quarterly sales in the fourth quarter of 2003 since the bubble year of 2000, reveals a new study from market research and advisory services firm RHK (South San Francisco). According to RHK analysts, the telecom industry "is past the bottom of its recession and growing again."

In North America, wireline service providers spent $7.5 billion on capital projects, 30% more than in the third quarter, while mobile operators' capital expenditures (capex) increased by 43%, reaching $6.1 billion. The dramatic rise in capex signals increased efforts by telecom service providers to address competitive threats from wireless and cable television, say analysts.

Cisco Systems, Alcatel, Nortel Networks, and Lucent Technologies ended 2003 where they started it—with the first, second, third, and fourth highest shares, respectively, of the $17.7 billion transport, switching, and access equipment market. Asian vendors made significant share gains last year, with Huawei moving from eighth to fifth, NEC and ZTE each moving up three places, and UTStarcom moving up four places to 17th.

Globally last year, sales of equipment for long-distance networks grew 19% to nearly $2.4 billion, while cable TV equipment vendor sales were not far behind at 17%, topping $1 billion. Optical networking was boosted by sales of metro-networking gear, while set-top boxes for digital TV rollouts drove cable TV revenues. Sales of switching and routing products for IP networks were up 8% during the fourth quarter, while sales of broadband Internet access gear such as DSL access modules and cable-modem termination systems grew to $1.1 billion, a 13% increase.

"The fourth quarter 2003 results clearly show the telecom industry is past the bottom of its recession and growing again," contends John Lively, RHK's director of forecasting. "Despite concerns about the stability of the Chinese banking system, declining revenues of North American service providers, and the projected U.S. budget deficits, RHK is forecasting continued growth in virtually all telecom sectors in 2004."

For more information about the series of reports, visit www.rhk.com or call RHK client services at 650-246-2000.

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