ADC Telecommunications (ADCT) declared third fiscal 2008 financial results below our estimates. The company’s business was impacted by general macroeconomic weakness that resulted in restricted capital spending on the part of telecom service providers and original equipment manufacturers.

According to our assessment, the long-run business fundamentals remain intact for ADCT as increasing demand for video streaming and larger investments by enterprise customers for high-density data centers are expected to foster telecom carrier implementations for high-speed wireless and FTTX networking.

We reiterate our Hold rating on Telecom Argentina SA (TEO), the leading provider of communications in Buenos Aires, Northern Argentina and Paraguay. The company's recent operating results are being driven by the growing domestic cellular telephony market, the largest in Latin America in terms of mobile penetration.

Although Telecom Argentina's wireless and Internet subscriber base continues to increase at a respectable pace, frozen fixed-line tariff and inflationary conditions impacting the cost structure may limit profitability levels for the remainder of 2008. Additionally, the uncertain economic outlook and challenging competitive environment are considerations that we believe may limit valuation levels. Moreover, capital spending for the full year 2008 is expected to increase on a year-over-year basis due to cellular and broadband infrastructure requirements.

Wireless must be the one of the most dynamic markets you could find. It is unique because success really depends on perfectly combining the strengths of the participants in two different yet intimately related industries: the carriers and the cell phone makers. Their destinies are irremediably intertwined. Consumers drool over having the latest almighty gadget that allows them to not only make phone calls (talking is so yesterday!), but most importantly, remain plugged into the world through text messaging, picture taking, internet access, TV on the go and all sort of cool functions.

This is the realm of the so called smartphones. They really are command centers for the life on the move. Yet, the gadget is only half of the story. In order to be able to actually enjoy all those neat functions, consumers also have to select a carrier that provides all the services needed to get their cool devices going. They soon find out the having a sophisticated command center does not come cheap. The cooler the gadget, the more functions it has, the more services are needed from a wireless carrier in order to take full advantage of it.

Ciena (CIEN) is a great example of what can happen to a stock in a bear market. The stock was already down from 48 to 17 before their earnings announcement (see conference call transcript). The stock was trading at 8 times next year's expected earnings when you exclude net cash. It seemed like the stock was already pricing in some sort of disappointment.

Ciena gave negative earnings guidance and the stocks is down another 25%. Ciena provides necessary equipment for internet providers to expand bandwidth. It is obvious that we are bumping up against our bandwidth capacity as both Comcast (CMSCA) and Time Warner (TWC) recently started cracking down on "bandwidth hogs", customers who use too much bandwidth. Even if they can get rid of the bandwidth hogs, eventually they will need to expand their networks as people watch more video on the internet. Ciena will be the beneficiary.

F3Q08 Earnings Call

F3Q08 Earnings Call

ADC Telecommunications

Guidance

The consensus estimate is 26c for EPS and $388.55M for revenue, according to First Call.

Several surveys have revealed that Apple's (AAPL) iPhone users spend a lot of time surfing the Internet. Late last year, when Net Applications came out with its quarterly browser market share report, people immediately latched on to the fact that the iPhone, which at that time was in the market for a full 5 months, had a browser market share that was 33% greater than that of Windows Mobile (MSFT) devices.

This was obviously an amazing statistic at that point in time - in under two quarters, Apple’s handheld platform had passed Microsoft’s over a decade-old mobile platform in terms of browser use. The amazement was further amplified when you consider that iPhone was selling in only one geography (AT&T (T)) while over 20 million Windows Mobile platforms were in circulation. It’s not just just Windows Mobile that was getting killed by iPhone. S60/Symbian - the browser in Nokia’s N-Series platforms among others? About 1/10th.

The blogosphere has been abuzz since last week about Comcast’s (CMCSA) new policy limiting the amount subscribers can download. Starting October 1st, Comcast will limit users to 250 GB of total downloads per month. Violators will first get a warning if they exceed the cap. A second “offense” within 6 months will risk loss of service for a year.

Everybody seems Himmelhoch jauchzend over Ben Verwaayen as Alcatel-Lucent's new CEO.

Following a very sound tradition, here are some second thoughts. After all, he's Dutch and so am I; he's getting his hands on millions and I'm not. So, I will bring you down, baby.

With BCE Inc. (BCE) and Telus Corp. (TU) expected to announce a joint next-generation upgrade to their wireless networks as early as this week, the impact on the stocks of Canada's incumbent carriers should be "more neutral" than the market suggests, said National Bank Financial telecom equity analyst Greg MacDonald in a note to clients.

As originally reported in the Financial Post this past week, a new 3G HSPA network built by both Bell Canada and Telus will cost anywhere between C$440-million to C$1-billion in capital expenditure. However, Mr. MacDonald estimates Telus would generate roughly C$250-million more in revenue, C$85-million more in EBITDA and 250,000 more subscribers than it would be without the HSPA overlay.

Peek is a New York company launching a specialized email device (no other functions) under the same name, including service. Read this article for all the details.

The Peek device will cost $100 and service will be 20 $/mo (flat fee, no contract). T-Mobile USA is the network partner and Target is Peek's distribution partner.

Historically, I think many analysts, including yours truly on some occasions in the past, have argued that telco is a defensive sector in a market downturn (as it was at least for three months following 9/11). It's therefore interesting to note that telco, on a year-to-date basis, is 14th out of 18 sectors (down 26%), and the ones below it are non-bank financials (i.e., consumer credit, et al.), construction and construction materials, retail, and banks.
 

Tuesday’s paper reported the final death of AT&T. It had been dying a slow and lingering death since the end of the dot-com bubble killed the demand for telecommunications equipment.

When I say AT&T, I don’t mean SBC, the San Antonio-based Baby Bell that bought a struggling long distance company in 2005, and with it, rights to call itself “AT&T.”

Alcatel-Lucent (ALU) has found its new leaders: Philippe Camus of Lagardere SCA (and Evercore Partners) will be nonexecutive chairman, and former BT plc (BT) CEO Ben Verwaayen (pictured) will be CEO. 

In July, Alcatel-Lucent announced that CEO Patricia Russo and chairman Serge Tchuruk would be stepping down.

It isn’t exactly a secret that mobile devices such as Apple’s (AAPL) iPhone and Research in Motion’s (RIMM) Blackberry coupled with next-generation wireless services such as 3G and WiMAX are causing a fundamental shift in consumer, enterprise and carrier behavior. Consumption of voice, video and data services over mobile devices is increasing rapidly, and any good investor should be looking for creative ways to take advantage of this.

Unfortunately, the Apple and Research in Motion gravy trains have long since left the station, so investors interested in an alternative should look to the wireless communication tower operators, key beneficiaries who have yet to take off.

With the Russian invasion of Georgia, attention has been focused on Eastern Europe and any investment opportunities or bargains there. The Czech Republic is one of the larger countries in that part of the world. Here are some interesting facts about the country:

1. It is a pluralist multi-party parliamentary representative democracy.
2. They have a flat tax.
3. Their annual GDP growth has recently been approximately 6%.
4. It has the highest ranking compared to the former Comecon countries in the Human Development Index.
5. It ranks 35th out of all countries for GDP based on purchasing power parity.
6. Most of the country's economy has been privatized.
7. It has abolished border controls with all of its neighbors.
8. The Programme for International Student Assessment ranks the Czech education as the 15th best out of all countries.
9. 4.6% of their electricity comes from renewable sources, including hydropower.
10. They have the most Wi-Fi subscribers in the European Union.

Here are some stocks, and an ETF connected with the Czech Republic.

Yes, it was an overstretched, over-leveraged empire which had engaged in a lot of strange M&A and joint ventures with very strange put/call terms with partners. An aggressive 3G license acquisition strategy certainly didn't help the balance sheet, in fact, BT's decline from net cash position to rescue rights issue and de-merger of O2 was nothing short of stunning, if only for the sheer velocity with which it occurred.

This is a remarkable statement coming from an alternative operator, TelstraClear of New Zealand. The telco says the main result of faster broadband links to the home may be more downloads of pornography and movies rather than improvements to productivity, quotes the New Zealand Herald. "At the moment we don't believe that putting fibre into every home is economic or necessary."

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