67 WALL STREET, New York - January 30, 2012 - The Wall Street Transcript has just published its Wireless Communications & Telecom Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: 4G LTE and 3G Infrastructure Upgrades - Wireless Carriers Compete for Spectrum - Smartphone Operating Systems - Emerging Markets Growth Shifts to Data ARPU
Companies include: TriQuint Semiconductor (TQNT); U.S. Cellular (USM); AT&Ts (T); America Movil (AMX); Apple (AAPL); and many more.
In the following brief excerpt from the Wireless Communications Report,, expert analysts discuss the outlook for the sector and for investors.
Kulbinder Garcha is a Managing Director at Credit Suisse, with responsibility for global telecom equipment and IT hardware equity research. Mr. Kulbinder joined Credit Suisse in 2002, and prior to this he covered European technology stocks for two years at Goldman Sachs, and prior to that at Morgan Stanley. Mr. Kulbinder was part of the top three ranked teams in the Institutional Investor customized survey for the telecom equipment sector research from 1999 to 2009, achieving the number one position in Europe in the past five years and top two position in the U.S. last year. Mr. Kulbinder received an M.A. in mathematics and economics from St John's College Cambridge in 1998.
TWST: What are the major investment themes you are watching in the wireless space right now?
Mr. Garcha: I think there are two to three themes that are very important in the wireless space right now. I think the first one is the continued growth of the smartphone industry. Smartphone volumes last year were 450 million units; they grew 55%, but we don't think they have maxed out yet. We think that industry will continue to grow from these levels over the next two to three years and that it will will more or less double by 2015, reaching 1 billion units. So I think there's going to be very strong continued smartphone growth. The second thing is the question of within that smartphone growth, how the various ecosystems will play out.
You obviously have a very strong competitor with Apple (AAPL), with how the iPhone is progressing, and the iPhone will continue to increase its market share going forward. But you also have Android, which is going to continue to grow as well. Android has about half of the market, literally about 50% of the market, today. I also think, and we published some research on this very recently, we now have a potential recovery in the Windows platform, and Nokia (NOK) is trying to drive that. The question then is who suffers in that environment.
We think certain Android vendors are on the weaker side. We think HTC (2498.TW), Motorola Mobility (MMI) and Sony Ericsson (ERIC) are maybe on the weaker side, and we also think that Research In Motion (RIMM) has some real difficulties in terms of turning around their business. So I think the first couple of points will be, number one, smartphone growth and the continued volatile and changing competitive dynamics within it.I think that the second thing, which kind of impacts wireless mobility, has to do with how the computing market is changing. You have consistently had very strong tablet or iPad growth in the last couple of years, and our secular view is that last year, I think 60 million tablets were sold.
We think that number will be 100 million in 2012 and 300 million by 2015, and this will account for 40% we think of all computing products going forward. The additional thing here is that you've got the issue with respect to how the tablet market is going to impact not only mobile computing, but telephony as well. That is certainly another issue.I think the third thing, at least in the wireless sector, is in terms of spending levels along the networks running into constrains. You also have this balanced issue whereby the overall wireless carrier market - and by that, I mean the AT And Ts (T) and Verizons (VZ) of this world collectively - the question of their revenue issues for the infrastructure providers. We also look how that industry actually grows in revenue terms going forward.
TWST: Is wireless a good place to invest?
Mr. Garcha: I think the wireless equipment industry is one place that is a bit difficult. Within this, Qualcomm (QCOM) we think will benefit. The problem with the mobile phone market is largely share shifting from one vendor to another. You look at Research In Motion, you look at Nokia, you look at how MMI was before it was taken out, you've got an issue whereby there aren't that many attractive investment ideas. I think Qualcomm is one that works.With Qualcomm, it's much more about the quality of their business. Qualcomm gets paid, of course, by end licensing and through their chipset business. On the licensing side, they collect royalty for every 3G and smartphone basically sold in the world and every tablet that's sold.
So the growth in the end market drives their licensing business. What that basically means, we think, is that no matter who is gaining share, whether it's an Apple or whether it's a RIM, whether it's an Android vendor or someone else, Qualcomm will collect their royalty because they own the core I.P. along with two or three other companies in the world around which is designed as to how wireless standards operate. Secondly on Qualcomm, their chipset business, they have a 40% 3G WCDMA chipset share, but they are about to now ramp up or they started ramping up production with Apple, they will start with Nokia, and they continue to be very heavily aligned with Android.
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