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Mon, Jul 21, 2003 - Page 12 News List

Telecoms industry not likely to see growth this year

AFP , PARIS

The telecommunications equipment industry continues to battle weak demand for new infrastructures and strong competition for handset sales, causing many to predict sector growth will appear at the earliest next year.

This year is expected to be difficult, following a disastrous last year, according to a number of forecasts this week by various manufacturers.

Ericsson of Sweden, which released results on Friday, restated its goal of an operating profit by the end of the year, but will stay in the red overall owing to 1.2 billion euros (US$1.3 billion) in costs related to its restructuring plan.

On Thursday, Finnish rival and leading telephone maker Nokia sent tech markets reeling with news its handset sales would be unchanged or lower for the rest of the year.

Nokia chairman Jorma Ollila expected the market to remain flat next year and said the next growth phase would come in two to four years.

"We've seen during the last couple of years a significant decline in equipment manufacturers' revenues," John Chapman, an analyst with the Gartner institute, said. "This year is going to be a new year of decline, between 5 percent and 10 percent of the revenues, and next year might be flat."

"This year, mobile equipment [global revenues] should be below US$40 billion," compared with 44.9 billion last year according to institute figures, he said.

Gartner does not see a rebound before 2005.

In the US, Lucent Technologies said Wednesday that it "continues to work toward a return to profitability in late fiscal 2003."

The group added that it had suffered from reduced spending in North America and unexpected delays in finalizing certain contracts.

For the full year to end-September Lucent expects sales to drop by 20 percent.

In Britain, Marconi said Thursday that conditions remained difficult.

"Our markets remained very difficult during the quarter," said Marconi chief executive Mike Parton, while insisting there were some hopeful signs for the future.

Among these were the first signs in more than two years that some large telecom network operators were planning to increase investment, he said.

Euro-zone manufacturers also have to deal with a rise in the value of Europe's single currency, and Nokia's Ollila said that while third-quarter handset sales had risen by 10 percent in terms of units, revenue would be "unchanged or slightly lower" because of exchange-rate effects.

Although Sweden is not in the euro zone, Ericsson attributed one-third of a drop in sales to exchange-rate effects.

In addition, Asian manufacturers such as the Korean companies Samsung or LG are providing stiff competition though price cuts.

Meanwhile, demand for high-end mobile telephones has not proved as robust as expected.

Delays in launching the Universal Mobile Telecommunications System -- also known as third-generation or 3G -- have hindered a rebound in the sector.

UMTS is designed to provide e-mail, high-speed Internet surfing and live sound and image broadcasts to compatible handsets.

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