On TechTicker yesterday, Paul Kedrosky painted an ugly picture of how the credit crisis hurts telecom infrastructure. It goes like this: big telecom infrastructure rollouts like 3G in China are very often financed with debt, not from cashflow. With no access to the debt markets, the buildouts will stall and this will hurt the equipment makers. This is a surprise?
I mean really... Telecom equipment makers will bear the brunt of recessions because they lack a recurring revenue stream, it's their lot in life. In particular, he picks out Nortel as not likely to survive the downturn as an independent company, and I wouldn't contradict him on that.
But I'm really not so sure that all these infrastructure projects are just going to grind to a halt all of a sudden. It's not as if they raise money daily - most things that are in process have funding for a while. Look at Clearwire's WiMAX buildout, it has always been unclear if they have enough to finish the job, but they surely have enough that they can keep going for a while. Likewise, Sprint seems to be going forward with XOHM regardless.
The credit crisis is much more likely to affect telecom infrastructure buildouts gradually, slowing existing ones down and delaying new ones. Unlike the financial markets, where leverage can make or break you in days, in telecom it actually takes time on the ground to play out. In modern culture these days, it always seems like everything either happens fast or it ought to even when it just takes years to develop in reality. This poor sense of time leads to irrational exuberance sometimes - as when new technologies come out and we expect them to change the world overnight, e.g. VoIP and Internet Video. Likewise it can lead to irrational fear when Wall Street freaks out.
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