Monday, December 06, 2004

BellSouth Speaks

BLS held its analyst day today. Didn't really hear anything that makes me wanna jump. But here are few pointers which I thought are worth mentioning:

Expect wireline related capital expenditure to be flat with 2004 spend or about $2.4B. Have you looked at what the growth expectations are for box makers like LU, NT? Obviously there will be more spend towards IP/MPLS (boxes made by JNPR and CSCO) broadband and VoIP equipment. The street sure is not looking for flat year in 2005. Yes I agree BLS is just one component in the capital expenditure puzzle but the trend is clearly nothing to get excited about. Total capex will be at $6.8B to $7.2B primarily driven to Cingular.

Another non-shocker was the announcement that BLS won't be jumping into the TV offering business like SBC is planning to do with its IPTV initiative with MSFT. BLS is going to focus on getting ADSL 2+ rolled out and expectations are to reach 3M households, which is in the ball park of what VZ expects from its FTTP plan. This really does not benefit your favorite optical component supplier JDSU - as the management stated during the Q&A at their analyst day last week since JDSU can only address $50/home out of $150/home potential. This was not a big surprise to me but some people became little more realistic after listening to that comment.

BLS plans to spend $225/home passed for the upgrade to fiber plants and $80 incremental spend on ADSL/home passed which totals $305/home; well below $500-$600 SBC suggested it was going to spend for video system to its customers. Which strategy wins at the end depends on customers willingness to buy video from their phone providers. CMCSA, TWX and COX are not sitting still.

BLS suggested DSL trends are appearing to be accelerating thru Oct and Nov but driven by pricing cuts. So that might help some of the DSLAM providers and DSL chip providers, but remember there was inventory overflow last few quarters.

Other than that I did not hear anything else that was very exciting. But I am known to doze off during boring web casts.


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