Telecom Equipment Market Growing

Analyst: Telecom Equipment Market Growing

October 12, 2004

By Zev Stub

Israeli telecommunications equipment providers have turned the corner into recovery mode, with exciting opportunities for growth in 2005 and 2006," CE Unterberg, Towbin senior equity analyst Richard Church told The Jerusalem Post on Tuesday, following a whirlwind tour of 13 local telecom equipment firms.
"Church noted that the trip was part of a general effort by the investment bank to increase its focus on the Israeli market since opening up an office in Tel Aviv in May.

The new office, headed by Mark Green, has "significantly ramped up" Unterberg's status here, giving it the same level of importance as major players. The firm, which has been involved in Israel for many years, has already managed six public offerings this year, for Pharmos, VocalTec, M-Systems, Retalix, Tower Semiconductors, and Optibase.0D

Church declined to comment on individual companies, but said the market for Voice over IP (VoIP) technology presents one of the greatest market opportunities in the coming years. The convergence of voice and data over a single network poses the most significant opportunities in the realms of broadband and wireless.

"The transition to VoIP is breathing life into telecom competitors like Vonage" and other firms providing phone connections through the Internet, Church said. "Equipment companies can benefit greatly from that."

In response, telecom spending is on the rise. US giants like Verizon Communications, SBC Communications, and BellSouth Corp. are expected to upgrade their copper infrastructures to more modern systems in the near future. Church said he was told by sources at BellSouth that the company issued a request for proposals (RFP) to migrate its entire network to an IP-based system at the end of August. The regional provider also recently issued an RFP to develop an IP-video system.

"The telecoms are about to spend a lot of money, and Israeli companies are responding," Church said.

However, he said, the most aggressive market is not the US or Europe, but developing countries in Eastern Europe and Latin America. These do not already have strong infrastructures in place, and therefore the need to invest in state-of-the-art networks is more pressing, Church said.

Another significant opportunity for equipment providers is WiMax, a new wireless standard that allows notebook computers to connect to the Internet from anywhere. Chip giant Intel Corp. is working on developing a new chipset that would likely popularize WiMax the way its Centrino chipset helped push the WiFi standard. That chipset could be launched as early as the end of 2005.