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News | 09/01/2004 4:00 am EDT

Telcos face increasing cost reductions: Standard & Poor’s
Wireline telecommunications carriers will continue to face cost-reductions, and labour-related issues throughout 2004, according to Standard & Poor’s Equity Research semi-annual study of the industry. Industry Survey on Telecommunications: Wireline states the industry will face increased competition and sluggish revenue growth. "We expect wireline telecom companies’ difficulties to continue through the remainder of 2004," says Todd Rosenbluth, integrated telecommunications services equity analyst with Standard and Poor’s equity research services and author of the report. "The regional Bells should see access line declines of at least 4%, as wireless, cable, and Internet telephony make greater inroads into U.S. households. Also with the Bells having entered long-distance markets, pricing pressures are not likely to ease." However, the report is positive about the integrated telecommunications services (wireline) sub-industry. Year to date through August 20, the wireline carriers were up 0.3%, versus a 1.0% decline in the S&P 1500 Index. The telecom services sector has tended to be a strong performer as economic expansions mature with the recovery of business spending, notes the report. The report states that the issues affecting the main segments of the industry are competition from cable and wireless providers, the eroding difference between local and long-distance carriers, continued merger and acquisition activity, and labour issues.

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